A bad check is a check that bounces due to insufficient funds. Banks charge fees for processing bad checks, and repeated bad checks can lead to being blacklisted. Changes in check processing have increased the chance of bounced checks.
A bad check is a check that a bank bounces because the check writer does not have enough funds on deposit. This colloquialism refers to the fact that the check is “bounced” from the bank; such controls are also called “rubber controls”. In the United States, changes to the way checks are processed have increased the chance of bounced checks, as check writers can no longer rely on the so-called “float.”
When someone writes a check to another person or business, that entity in turn deposits the check with the bank. When a bank processes deposited checks, it checks with the issuing bank to make sure the check writer has enough money to pay it. If the funding for the check is sufficient, the deposit is made and the funds are transferred from the author’s account to the recipient’s account. If the funds are not sufficient, the processing bank returns the check to the person who attempted to deposit it so they know the deposit has not been made.
Because a lot of paperwork accompanies bad checks, banks usually charge a fee to process them. This fee may be applied to the person attempting to deposit the check, or to the person who wrote the check. In some cases, a bank will cover a bad check and then charge the author to make up the difference in funds. Generally, when a check is returned to a person or company, action will be taken against the originator to recover the funds, since the originator has presumably already enjoyed the service that the bounced check was supposed to pay for.
In some regions, people deliberately write checks that could bounce, based on a concept known as “float.” Float assumes that it will take several days to process a check, and during that time the check writer would be able to collect and deposit the funds needed to cover the bad check. This practice is not advisable, as many banks now use instant processing, in which case temporary shortfalls in funds could be a serious problem.
Most people try to avoid generating a bad check because it can reflect poorly on a credit record, and repeated bad checks can lead to being blacklisted by a particular company. Landlords, for example, can demand rent payment in the form of cash or money orders in the future if a tenant writes a bad check. Fees for bounced checks can also add up surprisingly quickly, and the originator may be liable for criminal actions taken on behalf of the check’s designee.
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