Cheque Bounce
A cheque bounce, also known as a bounced cheque or dishonored cheque, occurs when a cheque that is presented for payment is not honored by the bank due to insufficient funds in the account, an irregular signature, a post-dated cheque, or other reasons specified by banking regulations.
When a cheque bounces, it means that the intended payment has not been made, and it can lead to legal and financial consequences for the issuer of the cheque. The payee (the person to whom the cheque is written) and the bank will typically notify the issuer about the bounced cheque.
How is Cheque Bounce?
A cheque bounce occurs when a cheque that is presented for payment is not honored by the bank on which it is drawn. There are several reasons why a cheque may bounce, and these can vary depending on the circumstances and local banking regulations. Here are some common reasons for a cheque bounce:
1.Insufficient Funds: The most common reason for a cheque to bounce is insufficient funds in the issuer’s bank account. If there isn’t enough money to cover the amount specified on the cheque, the bank will not honor it.
2.Account Closed: If the issuer’s bank account has been closed or frozen, the cheque will bounce.
3.Mismatched Signature: If the signature on the cheque does not match the specimen signature the bank has on record for the account holder, the cheque may be dishonored.
4.Post-Dated Cheque: If a cheque is dated for a future date and is presented for payment before that date, the bank will likely reject it.
5.Stale Cheque: Banks usually have a validity period for cheques (e.g., six months). If a cheque is presented after its expiry date, it may bounce.
6.Crossed Cheque Issues: A crossed cheque, which is marked with two parallel lines, is meant for depositing into a bank account and not for direct cash withdrawal. If a crossed cheque is presented for cash, it may be rejected.
7.Technical Issues: There can be technical issues with the cheque itself, such as improper writing, overwriting, or other irregularities.