A bounced check is a check which is returned by a bank because the check's author does not have sufficient funds on deposit. This colloquialism refers to the fact that the check is “bounced” back from the bank; such checks are also called “rubber checks.” In the United States, changes in the way in which checks are processed have increased the possibility of bouncing checks, as check writers can no longer rely on so-called “float.”
When someone writes a check to someone else or to a company, that entity in turn deposits the check into the bank. When a bank processes deposited checks, it consults the issuing bank to ensure that the author of the check has enough money to pay for it. If funding for the check is sufficient, the deposit goes through, and the funds are transferred from the account of the author to the account of the recipient. If the funds are not sufficient, the processing bank bounces the check back to the person who attempted to deposit it so that he or she is aware that the deposit has not gone through.
Because a great deal of paperwork accompanies bounced checks, banks typically charge a fee for processing them. This fee may be applied to the person who tries to deposit the check, or to the person who wrote the check. In some cases, a bank will cover a bounced check, and then charge the author for making up the difference in funds. Generally, when a check bounces back to an individual or company, action will be taken against the author to recover the funds, since presumably the author has already enjoyed the service that the bounced check was supposed to pay for.
In some regions, people deliberately write checks which could bounce, relying on a concept known as “float.” Float assumes that it will take several days for a check to be processed, and during that period the check's author could raise and deposit the funds necessary to cover the bounced check. This practice is not advisable, since many banks now use instantaneous processing, in which case the temporary shortfall in funds could be a serious problem.
Most people try to avoid generating a bounced check because it can reflect poorly on a credit record, and repeated bounced checks may lead to being blacklisted by a particular company. Landlords, for example, may require payment of rent in the form of cash or money orders in the future if a tenant writes a bad check. The fees for bounced checks can also rack up surprisingly quickly, and the author can be liable for criminal action taken on behalf of the check's designee.
