A dishonored payment is one that the bank or payment processor refuses to complete

When you write a check, use a debit card, or set up an automatic transfer and the bank says no, that payment is dishonored. The most common reason is insufficient funds — your account doesn't have enough money to cover it. But a payment can also be dishonored if the account is closed, if you've put a stop payment on it, if the routing or account number is wrong, or if the bank suspects fraud.

The person or business waiting for that money doesn't get it. The check bounces. The automatic bill payment fails. The debit card transaction is declined. And you face consequences: overdraft fees from your bank, late fees from the person you owed, damage to your credit if the debt goes unpaid, and sometimes legal action if the amount is large enough.

Dishonored payments are different from declined payments. A declined payment happens at the point of sale — you swipe your card at a store and it's rejected right then. A dishonored payment is one that was accepted initially but rejected later when the bank tried to process it, usually within one to three business days.

Key Takeaways

  • A dishonored payment means the bank refused to send the money, most often because your account lacked sufficient funds.
  • You will owe both a fee to your bank and a fee to the person or business you were trying to pay, plus the original amount owed.
  • Dishonored checks can trigger criminal charges in some states if the check was written knowing the account had no funds.
  • The fastest way to fix a dishonored payment is to deposit money into your account and ask the recipient to resubmit the payment.
  • Repeated dishonored payments can damage your credit score and make it harder to open new bank accounts.

Why banks dishonor payments

Insufficient funds is the reason behind most dishonored payments. Your account balance is lower than the amount of the payment, and the bank won't let the transaction go through. This can happen even if you thought you had enough money — a pending charge you forgot about, a deposit that hasn't cleared yet, or a miscalculation on your part.

A closed account will also cause dishonor. If you closed the account before the payment was processed, or if the bank closed it due to inactivity or fraud, any payment drawn against it will be rejected. The same applies if you've issued a stop payment order on a specific check or transfer — you're explicitly telling the bank not to honor it.

Wrong account or routing numbers cause dishonor too. If you gave the wrong information when setting up a bill payment or transfer, the bank can't find the account to pull money from. Banks also dishonor payments they flag as potentially fraudulent — if a transaction looks unusual compared to your normal activity, the bank may block it to protect you.

Fees and costs when a payment is dishonored

Your bank will charge you a fee for the dishonored payment, usually between $25 and $35, though this varies by bank and account type. Some banks charge more for repeated dishonors within a short period. This fee hits your account whether or not the payment eventually goes through.

The person or business you were trying to pay will also charge you a fee — often $25 to $50 for a bounced check or failed automatic payment. Utility companies, landlords, and loan servicers all have their own fee schedules. If the payment was for a loan or credit card, you'll also owe a late fee on top of the dishonor fee.

If the dishonored payment causes you to miss a payment deadline, your credit score can drop. A single late payment can lower your score by 100 points or more, depending on your current score and credit history. This stays on your credit report for seven years, making it harder and more expensive to borrow money in the future.

Criminal liability for dishonored checks

In most states, writing a check knowing you don't have the funds to cover it is a crime. The charge is usually called issuing a bad check, writing a worthless check, or check fraud. Penalties vary widely by state and by the amount of the check, but they can include fines, restitution to the person you harmed, and jail time.

The key word is knowing. If you genuinely believed you had the funds and made an honest mistake, you're unlikely to face criminal charges. But if you wrote the check intending to defraud someone, or if you wrote multiple bad checks in a pattern, prosecutors can pursue criminal charges. Some states have a threshold — for example, if the check is under $100, it's usually a civil matter, but above that it becomes criminal.

If you receive a notice that someone is pursuing criminal charges for a dishonored check, contact a criminal defense attorney immediately. Many states allow you to avoid prosecution by paying restitution to the victim and the court, but you need legal guidance on how to do this correctly.

How to fix a dishonored payment

The fastest fix is to deposit money into your account to cover the original payment amount plus both fees, then contact the person or business you owe and ask them to resubmit the payment. Most businesses will do this once, especially if you explain what happened and show that the money is now there. Provide them with your updated account information if anything changed.

If the dishonor was due to a wrong account number or routing number, contact your bank to get the correct information, then give it to the recipient and ask them to try again. If you issued a stop payment by mistake, call your bank and ask them to cancel the stop payment order — this usually takes one business day.

For automatic bill payments that failed, log into your biller's website or call them directly and authorize them to retry the payment. Many billers will retry automatically after a few days, but you can speed this up by requesting it manually. Keep a record of when you requested the retry in case there's a dispute later.

If the dishonor was due to suspected fraud, your bank will contact you. Work with them to verify which transactions were legitimate and which were not. Once fraud is confirmed, the bank may reverse the dishonored payment and remove the fee, though this can take several weeks.

Impact on your bank account and credit

Repeated dishonored payments can get you flagged in ChexSystems, a banking history database that most banks check before opening a new account. If you have multiple dishonors in a short period, you may be denied a checking account at other banks, or you may only be offered a second-chance account with higher fees and lower limits.

A single dishonored payment won't show up on your credit report unless the debt goes unpaid and is sent to collections. But if you don't pay the original amount plus fees within 30 days, the creditor can report it as a late payment, which damages your credit score. After 180 days of non-payment, they can sell the debt to a collection agency, which will report it as a collection account — this is far more damaging to your credit.

Some banks offer overdraft protection, which links your checking account to a savings account or credit line. If a payment would be dishonored due to insufficient funds, the bank pulls money from the linked account instead. This prevents the dishonor but may charge you a transfer fee. Ask your bank whether this option is available and what it costs.

Dishonored payments and debt collection

If you don't resolve a dishonored payment within a reasonable time, the creditor can pursue collection. They may contact you by phone, email, or mail. If the amount is large enough, they may file a lawsuit against you in small claims court or civil court. A judgment against you can lead to wage garnishment, bank account levies, or liens on your property.

You have rights under the Fair Debt Collection Practices Act. Debt collectors cannot call you before 8 a.m. or after 9 p.m., cannot call you at work if your employer objects, and cannot threaten you with arrest or legal action they don't intend to take. If a collector violates these rules, you can file a complaint with the Consumer Financial Protection Bureau or sue the collector for damages.

If you receive a lawsuit notice related to a dishonored payment, respond to it within the deadline stated — usually 20 to 30 days depending on your state. Ignoring it will result in a default judgment against you, which is much harder to overturn. If you can't afford an attorney, ask the court about legal aid services in your area.

Frequently Asked Questions

Can a bank charge me a fee if I didn't authorize the dishonored payment?

If the payment was fraudulent — someone else used your account without permission — you can dispute it with your bank. The bank should reverse the dishonor fee and the original charge. Report fraud to your bank immediately and follow their process for disputing unauthorized transactions. This usually takes 10 business days to investigate.

How long does a dishonored payment stay on my record?

A dishonored payment itself doesn't appear on your credit report. But if it results in a late payment, that stays for seven years. If it goes to collections, the collection account stays for seven years from the date of first delinquency. ChexSystems records typically stay for five years, though some banks may deny you an account for longer based on their own policies.

What's the difference between a dishonored check and a stop payment?

A stop payment is something you request — you tell your bank not to honor a specific check. A dishonored check is when the bank refuses to honor it on its own, usually due to insufficient funds or a closed account. With a stop payment, you're in control. With a dishonor, the bank made the decision.

Can I go to jail for a dishonored check?

Only if you wrote the check knowing you didn't have the funds and intended to defraud someone. Honest mistakes don't result in criminal charges. But if you wrote multiple bad checks or wrote one for a large amount with clear intent to defraud, you could face misdemeanor or felony charges depending on your state and the amount. Consult a criminal defense attorney if you're contacted by law enforcement.

Will my bank let me make another payment after a dishonor?

Yes, as long as you have sufficient funds. A single dishonor won't prevent future transactions. But if you have multiple dishonors, your bank may close your account or restrict your ability to make certain types of payments. If your account is closed due to repeated dishonors, you'll need to open a new account at a different bank.