What are the Consequences of a Checking Account Overdraft?

Lori Smith

Substantial fees, a loss of check-writing privileges, and collection actions are among the most common penalties for a checking account overdraft. In some cases, criminal charges may be filed. Usually, it does not escalate to that degree, as long as the problem is addressed and corrected in a timely manner. The longer a bad check goes unpaid, the more serious the consequences can become. In most cases, however, a checking account overdraft may occur as a simple oversight and will not usually result in anything more serious than a bank fee.

Checking account overdraft may result in loss of check-writing privileges.
Checking account overdraft may result in loss of check-writing privileges.

The consequences a person may face for a checking account overdraft may escalate over time. At first, when a check is presented to a bank where sufficient funds are unavailable in the account, the financial institution will usually return it unpaid. When this happens, an insufficient funds charge is generally assessed to the account holder.

Overdrawing a checking account will result in an overdraft fee from the bank.
Overdrawing a checking account will result in an overdraft fee from the bank.

When people or companies receive notice that checks have bounced, or were unpaid, they are also frequently charged fees from their own banks. In turn, the payee will often seek reimbursement from the check-issuer, and charge an additional fee on top of the original amount of the check. If the account holder pays the fees accessed, in addition to the amount of the original check, collection proceedings cease and the account holder may be free to continue banking as usual.

In other words, a single indiscretion or mere oversight by the account holder will not usually create serious long-term consequences. The error itself can be quite costly, though. In addition to the fees imposed by his or her own bank, the check writer often pays substantial fees to the company or person to whom the check was issued.

Sometimes, the payee chooses to redeposit a bad check immediately. When this happens, if funds are still not available, then all fees may double. This causes a second checking account overdraft for the same check. Usually, though, check-cashing attempts are limited to two times before it will no longer be accepted by the bank. If this happens, collection efforts may escalate. Credit reporting agencies are often contacted. In cases like this, a bad check can mar a person’s credit report.

Paying for services or merchandise with a bad check may also result in a loss of check-writing privileges to that organization. For example, if an electric bill is paid with a check that is returned for insufficient funds, the utility company may flag the user’s account and refuse to accept checks from him or her in the future. The consumer will then be required to pay with cash or other means.

More serious consequences can occur as a result of a checking account overdraft. For example, it is against the law to knowingly write checks without having the funds available in the corresponding account. If a consumer writes a bad check for a substantial dollar amount and does not correct the error, it may be considered fraud or theft. If left unresolved, the crime may be prosecuted in a court of law. This can be done for the purpose of collecting the amount owed, including assessed fees, as well as criminal prosecution.

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Discussion Comments


@Ruggercat68, my bank will usually cover the face value of overdrawn checks to merchants, so at least I'm not going to be charged twice. I remember back in the day, one bounced check could really mess up your bank account, and get you blacklisted from local stores.


My mother-in-law was bouncing at least one check a month because she rarely checked her available balance or reconciled her checking account. When one check bounced, other checks written after that one would also bounce, and the bank fees made it nearly impossible to make any of them "good" again. We finally asked her bank for help and they set her up with an overdraft protection plan. It's basically a revolving credit account that automatically makes a deposit into her checking account if it ever gets overdrawn.

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