Checks are used widely to issue payments without having to use actual cash immediately. Instead, a check is written by the person making the payment (also called the drawer). The amount indicated on the check has to be covered by the funds in the associated checking account. The person whose name is indicated on the check (the payee) can then cash the check or deposit it to his bank account.
A bounced check is used to refer to a check which cannot be paid by the bank due to insufficient funds in the drawer’s account. Another term for a bounced check is a rubber check.
It is rather important that the drawer ensures that there are enough funds in his checking account to cover the amount written out in all his issued checks. This is due to the fact that there are repercussions associated with bounced checks. The specific repercussions depend on the state laws and the policies of the bank, but in general, charges and fees are applied on bounced checks. Oftentimes, the fees are considerable, and can even vary depending on the amount indicated in the bounced check. The higher the value of the check, the higher the associated fees for bounced checks.
In some cases, there is a grace period given for checks. If someone cashes a check and the funds are insufficient to cover the amount, the bank may inform the drawer and give him the chance to immediately fund the account. However, state laws have changed - and are changing, making this option invalid.