How to Protect Yourself from Overdrafts and Bank Fees

A bounced check is one that is returned (unpaid) to the depositor.

In other words, if you write a check, but you do not have enough money in your checking account to cover it, that check is considered an overdraft or a rubber (bounced) check.

What happens when you bounce a check?

The payee, whose name you have written on the check, will try to cash or deposit the amount in his own account. His bank will send the check to your bank for funds, but your bank will return (bounce) the check back as unpaid for insufficient funds and charge you a service fee/penalty for their trouble. Fees generally range from $20 up.

Writing checks that bounce will result in overdraft fees and damage a person's financial reputation. In fact, if a bank customer repeatedly writes bad checks, the bank may freeze, close, or cancel his account.

Most U.S. banks belong to ChexSystems, a national computerized network. Irresponsible banking behavior, such as writing overdraft checks, is entered into the ChexSystems database. Banks, lending companies, and even employers can access this information, which is retained for at least five years. Who says writing a few bad checks can't harm one's future finances?

What can you do to prevent overdrafts, even by accident?

Spend only funds you actually have.

This seems obvious, but an astonishing number of people continue to write checks, even after their funds are depleted. When we run out of money before we run out of month, this can be a temptation. Budgeting is essential!

If you run out of funds, temporarily, check with your creditors.

It may be safer to hold off on paying a bill for a few days (if possible) than to write a bad check. A late bill may result in a fee, but a bad check can result in a fee and ruin your credit standing for a long time.

Record all debit card transactions.