A returned check fee is a charge a business adds when its customer's bank sends a check back unpaid, most often because the balance in the customer's account was too low. Most US states cap the fee by statute, and some also let the business claim extra damages after a written demand.
Two different feesThe customer's bank charges its own customer an NSF fee. The business that received the check can charge a returned check fee.
State law sets the ceilingFlat caps run from $25 to $50 in the states below, and Florida allows 5% of the check when that is higher. New York sets no fee.
The demand letter mattersExtra damages usually depend on a written demand in the form the statute requires, and a wait of 15 to 30 days.
What is an NSF check?
NSF stands for non-sufficient funds: the paying bank refuses to honor a check because the balance behind it is too low. You will also see it written as insufficient funds. The bank returns the check to the business that deposited it, and the deposit is reversed.
A check is a demand draft drawn on a bank, as UCC section 3-104 defines it. The customer's bank has to pay it, return it or send notice of dishonor before its midnight deadline, or it can become liable for the amount under UCC section 4-302.
On a bank statement, the returned deposit usually appears as a debit labeled NSF, returned item or return deposit, often with a separate fee line if your own bank charges for handling returned deposits.
NSF check vs bounced check vs returned check
An NSF check, a bounced check and a returned check usually mean the same thing: a check the bank would not pay. The terms differ only in which reason they name.
- NSF check: returned because the account balance was too low.
- Bounced check: the everyday term for any check sent back unpaid.
- Returned check or dishonored check: the formal terms banks and statutes use. They also cover checks returned because the account was closed, payment was stopped, or the signature was wrong.
The reason matters for your remedies. Several state statutes below treat a check written on a closed account more harshly than one returned for insufficient funds.
How much is a returned check fee?
The maximum returned check fee a business can charge is set by state law, and the flat caps in the 10 states below range from $25 to $50. Florida allows 5% of the check when that is higher, some states add the bank's own return charge, and some tier the fee by check size.
Keep the two fees apart. The fee your customer's bank charges them for the returned item is between them and their bank. The fee you charge is a separate amount you are allowed to recover from the customer, and it is the one state law caps.
Returned check fee limits by state
This table shows the maximum fee a payee can charge for a returned check, and any extra damages available after a written demand, in 10 states. Each figure was checked against the state's official code on 14 September 2026.
| State | Maximum fee | Extra damages after a written demand | Statute |
|---|---|---|---|
| Arizona | $25, plus actual bank charges | Not in this section | A.R.S. 44-6852 |
| California | $25 for the first check, $35 for each later one | Three times the check amount, minimum $100, maximum $1,500, if unpaid 30 days after a certified-mail demand | Civil Code 1719 |
| Florida | $25 (check up to $50), $30 ($50 to $300), $40 (over $300), or 5% of the check, whichever is greater | Three times the amount owed, minimum $50, if unpaid 30 days after a written demand | Fla. Stat. 68.065 |
| Maryland | $35 | Up to twice the check amount, maximum $1,000, if unpaid 30 days after notice of dishonor | Com. Law 15-802 |
| Minnesota | $30, if notice was posted where the check was accepted | Civil penalty up to $100 or the check amount, whichever is greater, 30 days after a mailed demand | Minn. Stat. 604.113 |
| Missouri | $25, plus the actual bank return fee | Not in this section. The fee applies only if the check was not referred for prosecution | RSMo 570.120 |
| New York | No separate fee in the statute | Insufficient funds: twice the check or $400, whichever is less. No account: twice the check or $750, whichever is less. Requires posted notice and a second written demand | Gen. Oblig. Law 11-104 |
| Texas | $30 processing fee, for checks and other payment devices | Not in this section | Bus. & Com. Code 3.506 |
| Virginia | $50, covering checks and rejected electronic funds transfers | Legal interest from the date of the check, plus bank return charges and any awarded attorney fees | Va. Code 8.01-27.1 |
| Washington | A reasonable handling fee, with no fixed dollar cap | Collection costs up to $40, or the check amount if less, if unpaid 15 days after notice. Up to three times the check, maximum $300, through a court | RCW 62A.3-515 |
Checked against official state sources on 14 September 2026. Statutes change and most set conditions on the demand letter. General information, not legal advice.
Two patterns run through the table. Most states pair a small flat fee with a larger damages claim that only opens after a written demand and a waiting period. And some, such as Minnesota, only allow the fee if you told customers about it in advance with a posted notice.
These are separate from the late fee laws by state, which cover fees for paying late rather than paying with a check that bounces.
A worked example: a bounced check in California
A California business whose customer's $1,800 check bounces can charge a $25 fee, and can claim up to $1,500 in damages if the customer ignores a certified-mail demand for 30 days. The arithmetic is below.
- The customer pays an $1,800 invoice by check. It comes back marked NSF.
- It is this customer's first returned check, so the business can add a $25 service charge. The customer now owes $1,825.
- The business sends a demand by certified mail. Thirty days pass with no payment.
- Three times the check is $5,400. The statute caps damages at $1,500, so $1,500 is the most the business can claim on top of the amount owed. A good-faith dispute over the payment is a defense to the damages claim.
What to do when a customer's check bounces
When a customer's check bounces, reverse the payment in your books, contact the customer the same day, and ask for replacement funds by a method that clears. Keep a dated record of every step, because state damages claims depend on the demand and the timing.
Note the date and the return reason: insufficient funds, closed account or stopped payment.
The invoice goes back to unpaid, so your receivables match what you actually hold.
Tell them the check came back and ask for payment by bank transfer, card or certified funds.
Only if the statute permits it and any posted-notice condition was met.
Use the delivery method and wording your state's statute requires if you intend to claim damages.
After the demand period, decide between small claims, a collection agency or a write-off, and require cleared funds from that customer in future.
A letter of demand template is a starting point for step 5. Check it against your state's statute before sending, because some states require specific wording about the damages the customer faces.
Returned ACH payments and code R01
A business payment pulled by ACH debit that fails for lack of funds comes back with the return reason code R01, insufficient funds. It plays the same role as an NSF check for an electronic payment.
Many returned check statutes only cover checks. Some are wider: Texas covers any payment device, and Virginia covers rejected electronic funds transfers as well as checks. If your customers pay by ACH, read the statute's wording before you add a fee to a failed debit.
How to record a bounced check in QuickBooks Online and Xero
In QuickBooks Online, Intuit's method is an invoice that reverses the bounced amount and adds the returned check fee in one document. In Xero, you undo the reconciled payment so the original invoice is open again.
QuickBooks Online
Intuit's help article on recording a bounced check sets it up like this:
- Create an invoice for the customer with a Bounced check line for the amount of the returned check.
- Add a Bounced check fees line for the fee you are charging.
- Record the fee your own bank charged you as a separate expense.
- When the customer pays, record the payment against that invoice.
Xero
Find the payment that was reconciled against the returned deposit and use Remove & Redo. Xero Central's article on fixing a reconciled bank statement line explains that this removes the payment and sends the statement line back to be reconciled. The invoice shows as unpaid again. Add the returned check fee as a new line or invoice, and record your bank's charge as an expense.
How Paidnice chases an invoice after a bounced payment
Paidnice chases invoices that are unpaid in Xero or QuickBooks Online. Once you reverse the bounced payment there, the invoice is unpaid again, and Paidnice's reminders work from your ledger's current status.
- Reminders and statements: email and SMS reminders run on the schedule you set, and customer statements show the reopened balance.
- A customer payment portal: customers can pay the reopened invoice by card through Stripe, a method that clears.
- Escalation to a legal letter: an escalation can issue a template legal letter at the days overdue you choose, which you can word to match your state's demand rules.
Paidnice does not decide whether a returned check fee is allowed in your state. Set that from the table above, and keep the posted notice some states require.
