Dishonored cheques and its consequences

If you have a current account in a bank. Then your bank should have issued you a booklet of cheques slips. When writing a check for withdrawal ensure that all details are correctly entered and you have sufficient money in them. Failure to do this can have severe consequences. This will result in dishonored cheques. We explained this further below.

What are dishonored cheques?

Dishonored cheques are checks that fail to meet the drawee (the bank) requirement for withdrawing the sum of money on it. A check is dishonored for many reasons. We will explain them later on. The opposite of a dishonored cheque is an honored cheque. The bank accepts the check and pays the payee. This implies that there is no issue with the cheque issued by the drawer. 

It is expected that the drawer writes out the needed information in the cheque correctly without alteration, on one hand, the correct signature, and the amount in words should be the same as the amount in the figure. But that's not all that is required in a check before it is presented, on the counter of the banking hall, for payment. The payee should request payment before the date written on the check. If this is done, the bank will not honor it. 

Also, the payee shouldn't go to the bank three months after the date on the check. It will lead to dishonored cheques. In addition, the cheque slip should be neat, a rough slip will not be accepted by the bank. Make sure that you're with your means of identification for a bearer and crossed cheque to avoid cheques being returned. Finally, there should be funds in the drawer’s bank account to avoid this issue. 

Consequences of dishonored cheques

When cheques are dishonored, it has certain consequences for the drawer who issues the cheque. Below are some of them.

Trust

If the check is issued to a payee to collect the sum of money from the bank, the payee will not trust the drawer anymore on payment via check and may require another payment method.

Creditworthiness

Having cheques bounced several times will affect the drawer's credit rating. This is because banks send monthly reports on individuals whose cheques are dishonored periodically. 

Bank Penalty

Banks do charge for individuals with dishonored cheques. A minimum of 5,000 Naira may be charged to your current account if a cheque is bounced.

What other consequences do you think of? Comment below.