What is a Bounced Check?

//What is a Bounced Check?
What is a Bounced Check? 2017-10-01T02:57:13+00:00

Definition: A bounced check, also called a bad check, is a non-sufficient funds check that cannot be processed because there isn’t enough money in the account to clear it.

What Does Bounced Check Mean?

What is the definition of bounced check? When there is not enough money in a bank account to cover the value of a check, the bank may do one of two things. First, it may apply the note to the account, which will result in a negative balance for the payer, called an overdraft. Second, the bank may return the note to the payee.

It is important to note, the payee is the person or entity the check was written to as a means of payment or compensation. The fact that the check “comes back” to the payee is captured by the word “bounce” in the phrase.

In general, bounced checks are typically the result of a payer’s poor accounting or negligent retrieval of up-to-date financial data. Payers who write bad checks are routinely penalized with a negative account balance, penalty fees from their bank, penalty fees from the payee, or some combination of these three scenarios.

Example

On Friday, Candace decided to get her hair done at Josie’s Hair Parade for an upcoming wedding. Her stylist, Josie, charged $35 for a wash and set. Candace wrote a check for $40, to cover the basic cost of the service and provide Josie with a tip. Candace, in this example, is the payer and Josie’s Hair Parade is the payee. The problem: Candace only had $20 in her bank account.

When Josie attempted to cash the check, it bounced, or was returned to her, as a result of insufficient funds. Candace’s account was deficient by $20. As a result, Josie’s bank will charge her a penalty of $35. When Josie notifies Candace of the problem, she informs Candace that she is still responsible for the $40 she was originally charged, plus the $35 returned check fee, for a grand total of $75.

Summary Definition

Define Bounced Checks: Bounced check means a check is written for a value greater than the amount of money contained in the corresponding account.