Generally, you cannot cash a check if there are no funds to cover it. However, if you cash an item at a bank other than the check writer's bank, you can probably cash the check, because the bank you are cashing it at has no idea that funds are unavailable. However, you should not knowingly cash a bad check, and you must contend with penalties whenever you do so.
When an account holder writes a check, you can take that check to that person's own bank, known as the drawee bank, and attempt to cash it. Tellers at that bank can quickly see whether funds are available in the account, or if the check writer has funds available in a related savings or credit account. If no funds are available, you can still cash the item if a bank manager decides to allow you to do so. Bank managers sometimes make exceptions to normal procedures for long-term customers. A manager with knowledge of the account may do this if the account holder has a habit of writing checks before making covering deposits.
You can cash checks at your own bank if you have covering funds. This means you have enough money in your own account to cover the amount of the check you wish to cash. Your bank then sends the check for collection, and if it bounces, your bank deducts a sum of money equal to the bounced check from your account. You also have to pay a returned check fee and overdraft fees if the returned item causes your account to go into the negative. Your bank will not allow you to cash a third-party check if you have no covering funds in your account.
Cashier's checks are bank-issued checks which are treated as cash when presented for payment. Technically, cashier's checks never expire, whereas other checks are treated as stale-dated and non-negotiable six months after issuance. However, most states have laws that require banks to surrender "abandoned funds" to the state if funds held by the bank are unclaimed for five or more years. Funds used to buy cashier's checks are among the types of property that the state can seize if no one cashes the check within five years of its purchase. If you present a cashier's check after the bank gives the check funds to the state, that bank will probably cash it anyway, since federal laws state that cashier's checks never expire. Therefore, cashier's checks are one type of check you can sometimes cash even if there are no funds available to cover the check.
Check cashing centers usually charge significant fees because check centers have no way of knowing whether most checks are good or bad. If you cash a check that bounces, depending on your state's laws, the check cashing center could hold you liable for the bad check and pursue you for repayment of the money you received. Therefore, you should avoid cashing a check unless you know that funds are in place to cover the item.
- Comptroller of the Currency Administrator of National Banks: Answers About Overdraft Fees and Protection
- Banking Questions: Cashing a Check While Being Overdrawn; March 2007
- The Federal Reserve Board: Protecting Yourself form Overdraft and Bounced Check Fees; Februar 2005
- Bankrate: Bounced Check Fees Break the $30 Threshold