Cheque Bounce — Here's what you need to know to avoid cheque bounces

What causes a check to bounce?

Let's start with an explanation of what a cheque is. We'll go through what a cheque bounce is in more detail later.

A check is a negotiable document used by banks to transfer money in a physical form or to conduct inter-account transactions in a safe and secure manner. It is one of the safest methods to conduct corporate financial transactions since the bank records an entry against each check that may be tracked if required.

Now that we understand what a check is, let's look at what a cheque bounce is.

A cheque bounce is a word that describes the inability to process a dispensed check for a variety of reasons. Insufficient money in the issuer's bank account is one of the most common causes for a check to bounce. When there are insufficient or no money in the account, the issued check is returned. It's known as a bounced check.

What happens if a check bounces?

Cheque bounce is considered unlawful and a criminal offence in India. Penalties may be imposed on the issuer. In certain situations, the bank may initiate legal action against the issuer.

So now you know the answer to the question, "What happens if your check bounces?"

Let's look at what causes a check to bounce in India.

Although there are various causes for a check to bounce, such as an inaccurate date on the cheque, a mismatched signature, a mismatched amount and numbers, a damaged cheque, overwriting of a cheque, and so on. Insufficient funds are the most common cause of a check bounce.

To begin with, if the account from which the check was issued does not have sufficient cash, the check is likely to bounce.

The second kind of cheque bounce occurs when you get a check from an account that has little to no money in it. The bank will not process the check if this occurs.

Both of these are examples of a check that has bounced. In each of the foregoing scenarios, both parties will face a nominal penalty. To avoid a check bounce, ensure that there are adequate money in the account.

A bounced check cost varies per bank, and numerous penalties, as well as service tax and cess, are added to the fees.

To avoid these fees, make the check payable at a later date and make sure there are sufficient money in the account to avoid a cheque bounce.

Another alternative is to complete your purchase with online payments or NetBanking. Online money transfers save a lot of money in terms of fees and penalties, and they're also quite handy. You may set up an automated payment system that requires no follow-up. Furthermore, online payments may be made 24 hours a day, seven days a week, saving you both time and money; when you log into your NetBanking account, all of your transactions are accessible at the press of a button.