What really happens if I bounce a check?

Don't bounce into debt by writing checks your bank account can't cash.

By Credit.com Jun 16, 2014 1:01PM
This post comes from Christine DiGangi at partner site Credit.com.

Credit.com on MSN MoneyMost people know they shouldn't bounce checks: It can be embarrassing, not to mention expensive, because returned checks or bank account overdrafts often result in fees. That may not seem too bad, but if they're not dealt with, bad checks can cause you a lot of problems.


Bouncing into debt

Checking accounts and credit usually exist in separate financial circles -- for example, debit cards have no impact on your credit -- but in the case of bounced checks, there's an exception.


Woman writing in check book © Bruce Laurance/Digital Vision/Getty ImagesIf you write a check that doesn't clear, the person or company you intended to pay with it can send the outstanding balance to a debt collector. Collections accounts are among the many things that can have a negative impact on your credit standing, and poor credit can make it harder for you to get a loan or credit card, as well as low interest rates on those products.


You may also find yourself in legal trouble if you bounce a check.  When you fill out the "Pay to the order of" line, you should know that person can come after you for sending inadequate payment. If you don't pay up, whoever you owe can sue you for the unpaid balance, and if they win, you may see a judgment on your credit report. Creditors consider judgments seriously negative items, and they can stay on your credit report for years, but you can get past their negative effects. For instance, if you want to buy a home, you'll need to pay the judgment before getting a mortgage.


Bouncers can get blacklisted

A bounced check isn't reported to credit bureaus like Equifax, Experian or TransUnion, but they can be reported to debit bureaus. Among the most well-known is ChexSystems, which collects financial data on savings and checking accounts. Like credit reports, lenders and other service providers use this information to assess the risk of doing business with a particular consumer.


"If you bounce a check it would be in a debit bureau report, which could affect your ability to obtain financial services, rent an apartment, get a cellphone, etc., even though your credit report is very good," said Rod Griffin, Experian's director of public education.

As with credit reports, you're entitled to a free annual copy of your debit report, which you can request through the bureau. 


Griffin said it's uncommon for a bounced check to end up in collections or result in a civil judgment, but it's not a risk you should take. It's important to maintain the best credit rating you can, because good credit scores often help consumers save money. You can monitor your credit for free through Credit.com, where you get updates on two of your credit scores every month.


More from Credit.com


VIDEO ON MSN MONEY

1Comment
Jun 17, 2014 11:54AM
avatar
In our county, if it's over 50 dollars and you ignore it long enough, it's a felony.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.