What Are The Costs Of Bounced Cheques?

• A bounced cheque occurs when a bank rejects payment due to insufficient funds, a closed account, or errors on the cheque.

• Banks may charge overdraft interest or non-sufficient funds (NSF) fees — typically $30 to $50 per bounced cheque.

• While a bounced cheque may not affect your credit score directly, repeated incidents or legal escalations can hurt your financial standing.

• If you bounce a cheque, contact your bank and the recipient promptly, repay the amount quickly, and take steps to prevent it from happening again.

A bounced cheque simply means the bank has refused to process the payment. This typically happens when the issuer’s account has insufficient funds, the cheque is improperly filled out, or the account has been closed. When this occurs, the person or organisation expecting the money doesn’t get paid — and the issuer becomes liable for additional fees.

In Singapore, both individuals and businesses use cheques to make payments. If a cheque bounces, the penalties apply to the issuer, not the recipient. This means you’ll need to make good on the original amount and cover any additional costs.

» Your cheque may bounce if it isn’t properly filled out. Learn the steps of writing a cheque

When your cheque bounces, banks usually respond in one of two ways — they either process the payment using an overdraft (if you have such a facility), or they reject it outright due to non-sufficient funds (NSF). Both options come with financial consequences.

Overdraft

If you’ve pre-arranged an overdraft facility or your bank allows an unarranged overdraft, the cheque may still go through. However, this convenience comes at a price. Banks often charge interest on the overdrawn amount — sometimes as high as 8% to 20% p.a. — along with an administrative fee.

For instance, if you wrote a $2,000 cheque but only had $1,000 in your account, the bank might cover the shortfall temporarily, but you’ll start accruing interest from the day the overdraft is triggered.

» Here’s a comprehensive look at overdraft fees

NSF

In most cases, however, banks will reject the cheque due to insufficient funds. This is when you’ll be hit with an NSF fee — a flat charge imposed for every cheque that cannot be processed. Depending on the bank, this could range from $30 to $50 per instance.

The worst part? If you’ve written multiple cheques in a short span, these fees can snowball quickly.

Technically, a bounced cheque won’t show up on your Credit Bureau Singapore (CBS) report — unless it escalates. For example, if the bounced cheque causes you to default on a loan, or the recipient takes legal action that results in a court judgment, your credit score could take a hit.

There’s also the reputational angle to consider. Landlords, service providers, and even legal firms may hesitate to do business with someone known for issuing bad cheques. It’s not a criminal record, but it could still limit your financial options.

» Find out what factors influence your credit score

Mistakes happen — and if you’ve bounced a cheque, the most important thing is to act quickly and responsibly. Here’s what to do next.

Reach out to your bank and the cheque recipient

First, check with your bank to find out why the cheque bounced — it could be a simple issue like a post-dated cheque being presented early. At the same time, contact the recipient to let them know you’re addressing the issue. Being upfront can go a long way in maintaining goodwill.

Pay up quickly

Try to settle the outstanding amount and any related charges as soon as possible. The longer you wait, the higher the risk of further fees, legal consequences, or strained business ties.

Avoid bouncing cheques in future

To prevent another cheque from bouncing, consider setting up SMS alerts to monitor your account balance, avoiding post-dated cheques unless you’re absolutely sure of your cash flow, and checking your account before issuing any large payments.

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