What is a Bounced Check?

How can a bounced check impact your ability to do banking? Typically, customers who abuse banking systems get reported to an institution called ChexSystems. This is a private company similar to the three major credit bureaus in that it falls under the umbrella regulation of the United States Fair Credit Reporting Act (FCRA). ChexSystems is a private institution that provides risk profile data to banking agencies both large and small.

Thus, if you bounce a check, this action may show up as a negative mark on your ChexSystems' report. What does this mean? First, if you try to open up a new checking or savings account, banking professionals might audit your ChexSystems' records and determine that you are not a safe customer. Although a bounced check won't impact your credit report, it can ultimately hinder and tangle up your ability to do banking easily -- which can in turn impact how you can go about financing projects and saving for the future.

Will bounced check ?bad marks? stay on your ChexSystems' record forever? The answer, at least in theory, is no, ChexSystems typically removes marks after five years time. That said, since ChexSystems is a private agency, it can make mistakes and leave marks on file for longer than five years. Thus, as a consumer, you at the very least should be aware of whether or not ChexSystems has an open file on you.

If you do bounce a check, speak with a banking associate at your branch at the earliest possible moment to correct any problems. Your bank may charge you overdraft fees and other surcharges for the hassle. You may also face potential actions from the person or institution whom you paid with the bad check.

It's possible to write a ?good check? with non-existent funds from your banking account. However, if you do dip into that overdraft protection, you can run up significant debits and potentially lose your banking account. To prevent getting stung by the repercussions of writing bad checks, keep an accurate ledger of your assets and liabilities, and if you are ever in doubt as to whether you have enough cash in your banking account to pay a creditor, find some alternative plan (such as a leasing program) to make your payments.