Consequences
When a bad cheque is written, the following consequences may occur:
- The cheque writer may be charged a fee by his/her own financial institution. This fee may vary, depending on the bank's policies.
- If paying the item puts the account holder in a negative status by a relatively small amount, the bank may choose to honor the cheque. When this occurs, the account will be overdrawn, and the fees charged by the bank will place an extra burden on the account until the overdraft is covered. This is a civil matter with the holder's bank and not likely to be subject to outside reporting if settled quickly enough.
- If the paying of the item would place the account quite deep in the hole, the bank will likely choose not to honor the cheque. The item will be returned to the depositor's bank, and ultimately to the depositor. The amount of the cheque plus the depositor's bank's fee will be debited from the depositor's account. The depositor then may choose to re-submit the cheque, hoping it will clear on a second attempt, or else proceed immediately with collection activities, civil or criminal.
- If the dishonored cheque has been scanned and replaced by a substitute check, the original cheque is not returned to the depositor, but instead the substitute cheque will be marked "not sufficient funds" and returned to the depositor.
- The recipient may choose not to accept cheques in the future from the writer (typically recorded on a paper or electronic "Do not accept checks from..." list), or may suspend the cheque-writer's privileges until the cheque-writer has made good on the debt.
- The recipient may choose to report the writer to a database like Check Connection, TeleCheck, Shared Check Authorization Network (SCAN), or ChexSystems. This may lead to other merchants in the future refusing to accept checks from the writer or a joint account holder, or the writer having trouble obtaining a checking account at another bank for several years.
- If a merchant or other place of business (particularly small businesses) receives too many bad checks from customers, it may simply decide to not accept any cheques at all from anyone.
Read more about this topic: Non-sufficient Funds
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