Writing a check on a closed account is never a good idea. In fact, it’s a form of check fraud, which is a crime. Not only can it have legal ramifications for the writer, it can also impact your credit if the bank reports it.
What Happens When You Write a Check on a Closed Account?
When you write a check on a closed account, your action can have a domino effect, causing a variety of things to occur. Here are some things you need to know.
- You fail to follow through on a legal commitment
Writing a check to buy goods or pay for services is essentially filling out a legal document and making a promise to pay a specific amount. Think of it as a legal contract. When you write a check on a closed account, however, you cannot make good on your legal commitment to pay.
- Bank and returned check fees can be incurred
Banks typically charge around $35 for returned checks — or checks that can’t be covered by funds in your bank account. The business you wrote the bad check to may also charge a returned check fee of $20 to $50, depending on the state where the business is located.
- The check may be reported to a consumer collection agency
If you don’t contact your bank and try to resolve the issue of the bad check, the bank may send the amount of the check to a collection agency. The collection agency may report it to the credit bureaus, which can result in a collection account appearing on your credit report for up to seven years.
- The check may be reported to a consumer reporting agency
The bank may also report you to a bad check database or consumer reporting agency — such as TeleCheck or ChexSystems — which tracks banking deposit history. Negative information can stay active in such databases for five years.
These systems are mainly used by credit unions and banks to determine whether or not you are a good candidate for a banking account. Once your information is listed in this type of database, you could have trouble opening a new bank account.
When you write a check on an account that’s closed, there’s no way for the person or business who received the check to collect the amount due. If you don’t take immediate action to resolve the situation, you could face collection fees and civil or criminal penalties, including arrest.
What Kind of Legal Trouble Can You Get Into for Writing a Check on a Closed Account?
Once you write a check on a closed account, you’ll likely have to pay separate fees to both the bank and the business you wrote the check to. But legal penalties can result as well, which can differ from state to state.
- Civil Penalties: The amount that those who received the bad check can collect to cover fees and associated charges, which can often be more than the face value of the check.
- Criminal Penalties: When you write a check on a closed account intending to commit fraud, it can become a criminal matter, resulting in arrest and prosecution. And in some states, if you write a bad check for more than $500, it can be considered a felony.
In some states, you may also have to complete a class on financial management as a way to offer restitution for the bad check.
What You Should Do if You Write a Check on a Closed Account
If you happen to write a check on a closed account, the longer you wait to resolve it, the worse the consequences may be. Here are some steps to consider taking:
- Contact the bank to explain your mistake, and pay any fees owed.
- Contact the person or business you wrote the check to and explain your mistake.
- Pay the person or business the amount of the check with cash, plus any fees incurred as a result of the bad check.
If the check was written due to a misunderstanding, then your move to pay the balance and rectify the situation will show all parties involved that you aren’t trying to defraud any of them. They are still within their legal rights to follow any and all of the above punitive actions, but this may convince them to not do so.
Reasons Why Your Checking Account Was Closed
Accidents do happen and writing a check on a closed account is possible. However, your bank should have sent you notifications that your account was in danger of being closed before actually closing it.
But why might your checking account be closed without you realizing it? Here are some possible reasons:
- If you’re in the habit of writing checks when your bank account doesn’t have enough funds to cover the amounts.
- You allow your bank account to carry a negative balance for days on end.
- You rarely use the account.
Note that there is very little reason not to be aware of a closed account to the point that you write a check on it. While it is possible, this fact alone may make it hard for a bank or receiving party to believe you accidentally wrote a check on a closed account (versus, say, a simple overdraft).
Will a Check You Write on a Closed Account Show Up on Your Credit Report?
In general, a check you write on a closed account will not show up on a traditional credit report, but there are some exceptions. For example, if the balance is turned over to a collection agency or you are sued as a result of the bad check, those actions can appear on your credit report. In addition, if the check you write is to pay a bill and you don’t resolve it, the company may report the payment as late to the credit bureaus.
One way to keep tabs on your credit is to sign up for a credit monitoring product, such as ScoreSense. ScoreSense provides you with three credit reports, three credit scores and other benefits, such as monthly updates, daily monitoring and credit alerts. If you’re not already signed up for this type of service, isn’t it time to get started?