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What Is a Return Payment Fee? Everything You Should Know

With online bill pay, debit cards, and peer-to-peer transfers, you may not pull out your checkbook too often. But more than 40% of Americans still write paper checks in any given month, particularly when paying contractors and landlords, giving to charity, and paying taxes.1

That means it’s still valuable to know how to write a check – and it’s equally valuable to know what happens if you don’t have the money in your bank account to cover the check. If you accidentally write a bad check, you could owe a return payment fee, also called a returned check fee or return item fee. In some cases, you may owe an overdraft fee instead.

But what is a return fee? Below, we’ll walk you through how these fees work, how much they can cost, and how to prevent them.

What is a returned check fee?

A returned check fee is a fee your financial institution charges when you write someone a check, but there aren’t enough funds in your account to cover it. It will be denied when the person tries to deposit or cash your check. This is also called a “bounced check.” When this happens, your financial institution may charge you a fee.

This fee may also be called a return payment fee, a return item fee, or a non-sufficient funds (NSF) fee. If that last one sounds familiar, you may have encountered this when trying to swipe your debit card for more money than you have in your bank account.

Some banks and credit unions allow you to overdraft, meaning they’ll cover the excess cost of your bad check, but you’ll have to pay the money back to the bank. Depending on the financial institution, you may also have to pay an overdraft fee for this service.

How much do return fees cost?

A returned check fee will vary by financial institution, but costs can go from $10 to $50. A recent survey found fees as high as $36 at major banks, while the median return check fee cost was $12 across all financial institutions.2

The cost of overdraft fees is similar to returned check fees, but these can also vary by institution. Overdraft fees can reach $35, but last year’s average fee was $15, half of what it was two years before, as more financial institutions move to reduce or remove these fees.3

In addition to return payment fees or overdraft fees, you might owe late fees to whomever you gave the bad check to. Landlords, utility companies, and contractors likely have policies about bounced checks and will expect prompt payment if your check doesn’t clear.

Unfortunately, there’s more than the monetary cost to consider when writing a bad check. It can also hurt your ability to bank. While financial institutions don’t report returned payments to credit bureaus, they may report them to consumer reporting agencies like ChexSystems. Negative marks on your ChexSystems report could make it more challenging to open new bank accounts down the road.

Find out more about bank fees and how to avoid them.

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How to prevent returned check fees

The best way to prevent a returned check is to make sure you have enough money in your checking account before writing the check. The recipient may not cash or deposit the check right away, so you’ll need to monitor your account online (or your monthly paper bank statement). Keep enough money in your checking account to cover the check until it’s cleared.

But what if you wrote a check and, after handing it over, realize you don’t have the money to cover it? Here are a few ways to prevent returned check fees with your financial institution:

1. Make sure the check has cleared

If the check has not yet cleared, you can request a stop payment on the check. To do so, contact your financial institution and ask to cancel the check.

This may, however, result in a separate fee – and you’ll still have to figure out how to pay whomever you wrote the check to in the first place.

2. Contact the recipient

To avoid the stop payment fee, try contacting the payment recipient instead. If it’s a friend or family member, call them and ask them to wait to deposit or cash the check. Most loved ones will be understanding.

However, if you used the check to pay your landlord or a contractor, you may have less luck asking them to hold off on depositing the money. If they accept other forms of payment, such as credit cards, you can request to pay that way and have them void the check.

Just be careful with amassing high-interest credit card debt. It can quickly become more expensive (and dangerous to your credit) than a single returned check fee.

3. Contact your financial institution

If the damage is already done and the returned item fee has appeared on your bank statement, try calling your financial institution and explaining the situation. If this is your first mistake and you’ve been a long-time customer, they may waive the fee.

Banks aren’t required to waive this fee, though, so it pays to be polite when talking to the customer service representative. Just know that you might not get them to waive the fee.

4. Make a deposit to cover the check

If you realize you don’t have enough funds in your checking account to cover a check you’ve just written – but you do have the money elsewhere – act quickly to move the money into your account to cover the check.

If the money is in a connected savings account, launch your mobile banking app and transfer the funds. The transfer could be instant if both accounts are with the same bank.

Alternatively, go to the nearest branch or an ATM near you to deposit money into your checking account.

5. Opt into overdraft protection

Your bank or credit union may offer overdraft protection. With overdraft protection, your financial institution can cover whatever portion of the check you don’t have the funds for, either through another open account of yours or through future direct deposits.

This can help you avoid non-sufficient funds fees, though financial institutions may also charge you to use overdraft protection.

Double-check your checks to avoid fees

Return check fees can be costly, creating a headache for you and the person or business you owe money to. To avoid these fees, always check your account balance before writing a check to make sure you have enough money to cover the cost.

If you’re tired of dealing with bank fees that drain your funds, switch to a checking account with no monthly fees, like Chime.

Chime® is a financial technology company, not a bank. Banking services are provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. The Chime Visa® Debit Card and the Chime Credit Builder Visa® Credit Card are issued by The Bancorp Bank, N.A. or Stride Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit and credit cards are accepted. Please see the back of your Card for its issuing bank.

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* Chime SpotMe is an optional, no fee service that requires a single deposit of $200 or more in qualifying direct deposits to the Chime Checking Account at least once every 34 days. All qualifying members will be allowed to overdraw their account up to $20 on debit card purchases and cash withdrawals initially, but may be later eligible for a higher limit of up to $200 or more based on member's Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. Your limit will be displayed to you within the Chime mobile app. You will receive notice of any changes to your limit. Your limit may change at any time, at Chime's discretion. Although there are no overdraft fees, there may be out-of-network or third party fees associated with ATM transactions. SpotMe won't cover non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. See terms and conditions.

1 Information from The Washington Post's "Paper checks are dead. Cash is dying. Who still uses them?" as of December 20, 2023: https://www.washingtonpost.com/business/2023/09/15/paper-checks-who-uses/

2 Information from Forbes Advisor's "Returned Check Fee: The Cost Of A Bounced Check," as of December 20, 2023: https://www.forbes.com/advisor/banking/returned-check-fees-cost-of-bounced-check/

3 Information from The New York Times' "Overdraft Fees Are Dwindling, Study Finds," as of December 20, 2023: https://www.nytimes.com/2023/06/16/your-money/overdraft-fees-banks.html

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