Bad Check Fees and Penalties

A check written with insufficient funds is a crime in every state and the fees and penalties can run as high as $1500. Additionally, it is estimated that U.S. banks earn more than $5 billion a year in bounced check fees and penalties.

Everyone knows that a check written without funds is not exactly the smartest thing you can do. Yet, Americans are check writing over 450 million bad checks each year. Here are some things you should know about writing a bad check (like fees and penalties) and tips to avoid the issue.

Penalties and Fees For A Bad Check: A bad check is also known as a non-sufficient fund check, insufficient fund check, NSF checks, bounced check, rubber check, bogus check and many other terms. The bottom line is, these checks can be very costly in more ways than just a "simple" bank fee or penalty.

An aggressive city district attorney will not hesitate to prosecute someone for writing a bad check. Therefore not only will the bank charge a fee or penalty, plus the merchant possibly charges you a fee or penalty, but you may be liable civilly and criminally. You can see your state's penalty for writing a bad check at the following link: Bad Check Law By State

If you are prosecuted, you may be able to avoid the problem if your county has a diversion program. Instead of being tried you are given the option of attending classes, which can range from 4 hours to 20 months. If you elect this option you pay the tuition, which is usually $40 to $125 per session, plus make restitution on the check.

Banks love a bounced check. Most banks charge $20 to $30 for each bad check even though the actual cost of processing these checks is only 12-35 cents... that's a tidy profit of about 5,600%. Why would anyone want to give a bank a 5,600% profit?

A stale check is a check that was written a long while before and never cashed. Does this mean you can ignore the fact that the check was written? Some people erroneously do just that since institutions are not bound to honor a check older than 6 months. However, most banks will still honor these checks unless there is a statement to the effect, "Not valid after xxx days."

Tips to Avoid Writing Bad Checks

Balance your checkbook monthly and keep a running balance updated in your register.
If you have a "stale check", contact the creditor or at a minimum stop payment on the check. But do not put the money back into your account unless there is an extreme reason to do so.
See if your bank offers a check guarantee service. A service like check guaranteed could be far less expensive than fees and penalties.
Open an account at a credit union that offers interest bearing checking accounts. Maintain an extra $100 (any amount can work) but do not enter it in your register. This way when you balance gets close and you are not aware of it, you still have a safety margin and your money is always working for you drawing interest.
Always round up your dollar entry in your register to make the check for more than the actual amount. After a couple months you will have a rather sizeable nest egg to depend on.
Immediately enter all debit charges, automatic withdrawals, service charges, etc. before you forget. Bounced checks costs dearly.
Balance your checkbook faithfully. If you cannot keep up with register entries and current balances, consider closing the account and using postal money orders.