NSF Check

What is an NSF check?

An NSF check, or non-sufficient funds check, is a check that bounces because the payer's account lacks funds to cover it. When you deposit a customer's check and it returns NSF, your bank reverses the deposit and may charge you a fee. You are back to having an unpaid receivable plus the cost of the returned check. NSF checks require immediate follow-up.

Handling NSF checks

Contact the customer immediately when a check bounces. Request immediate replacement payment, preferably by a more reliable method like credit card or wire transfer. Most states allow you to charge an NSF fee to recover your costs. Record the reversal of the deposit and any fees in your accounting system. Update the customer's account to show the amount still owed.

Preventing NSF problems

For new customers or large amounts, consider requiring certified checks or electronic payment. Check verification services can flag high-risk checks before deposit. Establish a policy for customers with NSF history, such as requiring cash-only payment. The cost of lost checks and collection efforts often exceeds any discount you might offer for reliable payment methods.