My Renter Bounced a Check

Bounced CheckIf you have been following along, you know that my rent collections are outstanding; this month I had trouble.  My renter bounced a check.  I have not had a truly late payment in several years, other than the one tenants that I inherited when I purchased the building.

I have had a few payments after the first, but always received before the late fee kicked in after the 5th, and have not collected late fees, or even waived them, for rent paid on or after the 6th in a long time.

However, I recently had a check returned to me from a payment that was not honored by the bank.  My renter bounced a check.  Yikes! my mortgage is due and I am short rent.

I deposit my rent checks as soon as I get them.  If it means a couple of trips to the bank, so be it.  I have a bank branch in the building I work in, so going to the branch is easy.  I even do it during the business day, on a break from work, so it doesn’t even cost me time or money to go there.

How to Make A Rent Deposit

When I make a deposit, I fill out a deposit slip and give it to the banker.  I write down each check and the amount.  That way, when I need to double check a deposit, I can bring up the deposit slip image on-line, and see what checks I have deposited.  An ATM deposit only gives me a hard copy receipt, with the check images, and I do not want to have to find that receipt in a file somewhere.  And, the image is too small to really see the individual checks.  Of course, I also log the checks in Quicken, so I have two places to verify payments if I have to.

Once the deposit is made, I typically make sure I can see the deposit via online banking.  If it is there, I know the deposit was done correctly.

One time had a case where instead of giving me immediate credit for a check drawn on the same bank that I bank at, the deposit was put into that account.  I noticed after about three days and looked back at my receipt.  Sure enough, the receipt had the wrong account number.  It got changed, and luckily the money was still in the account, and all was well.  It could have been much worse as the deposit was ~$3,200.

Check The Account Regularly – Online

I check the account daily for a few days after the deposits to make sure none have bounced.  Once they have sat there for a few days, I transfer the money, after I have paid my rental expanses, to my investment account.  This month, I got a text saying my balance was low and I was not expecting it.  I immediately went online and saw a returned deposit and a charge for the returned item of $1,045.

Follow Up Immediately if there are issues

I texted my renter to get an explanation.  She was off by $100 in her expected bank balance, and my check got returned.  I requested new money, and for her to add $30 for the bad check.  I could have also charged the $75 late fee, but I declined as she has been a great renter for just over three years.  She also had given me notice she is moving at the end of November, as she could not afford it any longer.  I did not want to add to the financial pain by charging an extra $75.

It turned out to be a non-event, and I got $1,000 cash right away, and the remaining $75 on the next Friday.  That is the way a bad check should work out.  The tenant wrote a bad check unintentionally.  The money was almost there, she was not trying to buy time and send a check to avoid being evicted.

I have had checks bounce in my low-income days by some tenants, but for the most part my low-income tenants paid cash.  That is acceptable, but takes more time to collect.  If you are chasing down cash every month from a bunch of tenants, expect it to wear you out.

Start Evictions Early, If Needed

If this would have been a attempt at avoiding payment, I would have started eviction almost immediately.  If a renter know rent is due, they should have it.  A bounced check does not take any money from the renters account, other than the returned item charge.  The rent money should still be mostly there.

Have you ever bounced a check intentionally?  Ever have one that bounced that was difficult to collect?



11 Replies to “My Renter Bounced a Check”

  1. Thanks for sharing Landlord. I’m glad it worked out, but have no doubt you weren’t on the brink of financial ruin 🙂 I only have two experiences with bounced checks. The funniest was a family friend, who wrote me a check as a birthday gift. I was 15 or 16, and she wanted to give me a few bucks. Well her $25 check bounced. Haha. I felt so bad for her. Anyway, it worked out fine. She paid the return fee, so no big deal.

    As for me bouncing a check…..Something happened with my direct deposit paycheck, during my freshman year in college. Fortunately, my credit union at the time had overdraft protection. I was embarrassed, but no worse for wear.

    Hope you have a great weekend!

    1. Thank you for reading!

      I was not going to go broke, but my Mortgage company would not have allowed me to use my tenants excuse… I imagine as a kid it was a bit awkward to ask for a ‘better present’, after all anything for a birthday is a gift by definition.

      I once had a bad check from JC Whitney, a automotive supply house out of Illinois. I received a rebate check for something like $5, and it bounced. I never ordered from them again. They said it was written on the wrong account, but did not refund my bank charges.

      I also wrote one once. I had a deposit that was made and a hold was put on it. The bank did not release the hold after a week+, and one of my checks bounced. I had the bank write a letter indicating it was their fault.

  2. Another great post! I had a tenant that wrote me a bad check once. Unfortunately, she was not like your tenant in the article. She was great for the first year, but a complete nightmare for the second year up to eviction. Long story short – check bounced and from that point I required cash payments. That worked for a few months until the cash dried up and I was forced to evict her. Bottom line – bounced checks lead to evictions.

    1. Thank you for reading

      It’s always a bad sign when you get a bad check. Sometimes it is an honest mistake, sometimes it is the tip of the ice berg. That is where credit score comes in. The credit score will measure the integrity of the rental candidate.

  3. My father in law used to have a small business and occasionally cheques would bounce, he found out early on that CDN banks have a service will they will monitor an account and as soon as there is enough money to cover an NSF it’s pulled from the account. it’s not well known, I mean most tellers don’t even know about it, usually they have ro ask the manager. I don’t think he ever failed to collect.

    Do you have the option for direct debit?

    1. Thank you for reading!

      I can do direct debits, and always give that option to tenants, but most prefer to write a check and drop it in the rent box. At some point, I may mandate the direct debit. I know a lot of other landlords that do that and it works great.

  4. My rent that I collect is at least 30% under the market, and I rent to students, so they split an apartment between themselves, some apartment comes as low as $325/room. Most students who receive financial aids or working part-time job shouldn’t have any issue making rent. However, they do live on very tight budget, such as when they move in, some of them ask me to if they can give deposit a day or 2 after because their paycheck hasn’t coming yet, etc. I usually work with them.

    One tenant didn’t tell me not to cash their check until 7 days later, so the check bounced. I called my bank, and they were okay at waiving the fee. So, it was all good.

    I work with tenant very closely, I’m very responsive to their text and email, so if something comes up, they can always tell me. I’m approachable, but I don’t’ want to be too friendly. 😛 I think I learned this from you on one of your post.

  5. I’m not a landlord, but occasionally must deal with physical checks. All of my bank checking accounts have phone apps that allow me to make deposits immediately using the phone camera to scan the checks.

    Enjoy your articles and MMM posts!

  6. I set up a savings account for each tenant and ask them to deposit the money there. It is less than a mile from the property and next to the main grocery store in the area. I get a text when the deposit is made.

    1. Thank you for reading!

      That is a great idea if you only have a l limited number of lower-quality tenants. With 25 tenants, I would need 25 accounts. I would have to check in 25 places for a deposit, and still run the risk of a bounced check.

      The tenant has to make a special trip to the bank to make a deposit, or get an ATM card. Can you imagine if you had to make a trip to the bank for your own mortgage payment, rather than use a auto-payment method?

      Most higher-quality tenants do not deal with cash, and want an easy way to pay. PayPal, Bill-pay, auto-debit etc. are all ways many landlords, including myself take rent.

      Most of my tenants still use a rent box in the building. Many of them are professionals (teachers, pilots, accountants, IT workers, military, etc.) with high credit scores, and write very few checks, but they like the control of writing a check.

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