Your Paycheck Bounced: What Now?

Photo (cc) by kristin wolff

The owners of a company I once worked for spent my paycheck on big-game hunting.

Well, maybe that isn’t exactly what happened, but my paycheck bounced the same week they decided to take an African safari tour. Up until that moment, it never occurred to me that a paycheck could come back marked insufficient funds.

Now that my ignorance bubble had burst, I had two choices: Deal with the situation or freak out. I first tried freaking out, but ultimately calmed down and realized that my employer couldn’t legally screw me.

I got the full paycheck, and you can too…

1. Call your employer

The first step sounds the simplest. It’s not.

Start by calling your employer and politely explaining the situation. If you’re lucky, someone in authority will apologize, make a few excuses, and cut a new check pronto. In my case, my boss replaced the check about a week later, but I still had to do a lot of legwork (basically, the tips mentioned below) to convince him I was serious about pursuing the matter.

So my advice: Before you make that call, play it safe and document everything. Write down who you spoke to, when you called, and what was said. Don’t threaten your boss, though. Just calmly drop into the conversation that you’ve looked into your options.

2. Call your bank

If your boss doesn’t do the right thing, you’ll need outside help – legal or governmental – to get your money back. And those folks will need written proof of the insufficient funds. That means copies of bank statements – and these days, not all banks mail these automatically.

The day my paycheck bounced, I called the toll-free number for my bank – which I found easily enough on the back of my debit card. I asked to speak to a representative in the “personal accounts department” and requested two things: a copy of the returned check showing the insufficient funds marker, and a copy of the current month’s bank statement showing the returned check and any overdrafts it caused.

I had to provide the representative with my checking account number, Social Security number, and telephone banking PIN to verify my account, but the statements arrived within a few business days.

3. Start a paper trail

It hopefully won’t get this far, but if you find yourself standing in front of a judge one day, you’ll need to prove your claim. After speaking to my employer, I called the legal aid office in my area. (Legal aid operates by state, but your closest office is a quick web search away.)

The lawyer I spoke with told me I may end up having to take my employer to small claims court and that I should start a paper trail proving my case. So I made a “bad paycheck” folder and started collecting documentation – like the paycheck stub and the insufficient funds notice from my bank.

4. Cover your debits

If you have any upcoming automatic payments, make sure you have enough money in your account to cover them. If you don’t have the funds, cancel the automatic payments. You can do so through your online banking account (if the payments go out from your bank) or by calling your creditor directly (if the payments were set up through them).

If you have upcoming bills but don’t have the funds, call the creditor and explain your situation. Some creditors are willing to give you an extra grace period if you’ve been a stellar customer in the past.

5. Damage control

You might not have time to cancel the automatic payments. In my case, I had set up several bill payments to go through the same day as my paycheck, most of which didn’t clear my checking account. If it happens to you, do some damage control. Contact your creditors, explain what happened, and ask if they’ll give you a pass and not penalize you with things like fees or negative reports to credit bureaus.

If you fail to make a timely payment on a bill that may reflect negatively on your credit history – like a mortgage or credit card – you might want to take an additional step: Write a letter explaining your situation and asking the creditor not report your late payment to the credit bureaus. Here is a template…

YOUR FULL NAME
YOUR STREET ADDRESS

CURRENT DATE

NAME OF REPRESENTATIVE (OR DEPARTMENT)
REPRESENTATIVE OR DEPARTMENT ADDRESS

NAME OF REPRESENTATIVE,

I spoke with you (OR YOUR DEPARTMENT NAME) on DATE regarding a late payment posted to my account. I am contacting you today to follow up on my request that this late payment not appear on my credit report with the three credit reporting agencies – Equifax, TransUnion and Experian. As I explained during our phone conversation, the reason your payment arrived late was an event beyond my control: my paycheck bounced.

I have been a customer for NUMBER OF YEARS. During my time with COMPANY NAME, I have had virtually no late payments, and would like to keep it that way.

Considering my excellent payment history and NUMBER years of customer loyalty, I hope you will consider completing this request on my behalf. This late payment was an isolated incident, and I look forward to a long customer relationship with COMPANY NAME.

Thank you for your time and consideration.

I look forward to your reply.

Sincerely,

FIRST AND LAST NAME

Once you write your letter, make a copy for yourself and send the original to your creditor through certified mail. You should receive a response to your inquiry within 30 days.

6. Report your employer

If your employer isn’t willing to work with you, report the company to the Department of Labor office in your state. Your specific legal remedies will depend on where you live – but almost invariably, your employer has to make good. Once you file a complaint, the labor office may be able to help you recoup your losses. You can find the contact information for your state by searching the U.S. Department of Labor’s Services by Location site. This site has links to labor laws in your state, as well as a list of offices.

7. Call a lawyer

In addition to having its own labor office, each state also has its own set of labor laws, and you’ll need to contact a lawyer to find out what rights you have. For example, you may have a right to “penalty damages” from your employer depending on where you live. California requires employers to pay extra wages after a paycheck bounces, according to the Legal Aid Society of San Francisco

Your employer is required to have enough money in the bank (or a credit arrangement) to cover your paycheck for 30 days after the date it is issued. If your employer’s check bounced, and you attempted to cash or deposit the check within 30 days of receiving it, you can collect a penalty from your employer. If your employer doesn’t pay you the owed wages immediately after the check bounces, it will owe you an extra day of wages for each and every day you remain unpaid (in addition to the amount of the paycheck itself).

A lawyer can also review your case and help you determine the best course of action. In some cases, the lawyer may be able to make a phone call and negotiate with your employer directly. In other cases, you’ll need to go to small claims court. Either way, bring your documentation folder with you when you visit the lawyer – having all that paperwork will only help your case.

Unfortunately, lawyers cost money. If you qualify as low-income in your state, you can get assistance from Legal Aid – it offers free or low-cost consultations and may be willing to send a lawyer to court on your behalf.

8. Call your employer (again)

Sometimes people just need to know you’re serious. After you’ve gone through any or all of the motions I’ve just mentioned, try contacting your employer again. They might be more willing to work with you once they realize you’re familiar with the law. In my case, my employer replaced the paycheck (and covered the insufficient funds fees) after my second call.

When you do call, get straight to the point, state all the facts, and explain that you’ve contacted the labor department and a lawyer. And don’t forget to keep it professional – some employers tape phone calls. To give you an idea, my phone call went something like this:

“Hello, I spoke with you five days ago regarding my paycheck that I was unable to cash due to insufficient funds in your account. In addition to the missing paycheck funds, I’ve also received a $25 insufficient funds fee as well as three $35 overdraft fees due to unpaid debits from my account after the check failed to clear. While you were unable to help me during our first phone call, I’d like to inform you that I’ve received proper documentation from my bank and spoke with both the Labor Department and my lawyer – who clarified both my rights as well as your responsibilities under the law. Now that I’ve gotten that cleared up, and you’ve had time to catch up after your big-game hunting trip, I was wondering if you could be of more assistance.”

Amazingly enough, my boss was full of apologies and happy to issue a new paycheck. If your employer still won’t play ball, document the call and contact your lawyer again. While you might be headed toward a legal battle, you will get your money.

And if it gets that far, you should start looking for another job. In that case, check out 10 Ways to Ace Your Next Job Interview.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
15 Purchases That Make Life Easier As You Age
15 Purchases That Make Life Easier As You Age

There are many products that can make getting older — or any time of life — a little easier.

17 Home Maintenance Tasks That Save You Money
17 Home Maintenance Tasks That Save You Money

Here’s how to cut household costs and maintain your property’s value.

7 Free Tools for Saving More Money at Amazon
7 Free Tools for Saving More Money at Amazon

Use these websites and other tools to save money — or earn extra cash — when shopping at Amazon.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

7 Effortless Ways to Make Extra Money
7 Effortless Ways to Make Extra Money

In the digital age, new ways of earning cash crop up all the time — and some require next to no effort on your part.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

14 Things That Are ‘Free’ With Medicare
14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

10 Things You Should Never Do With Bleach
10 Things You Should Never Do With Bleach

Does the pandemic have you reaching for bleach more than ever before? Learn the ins and outs of using this powerful disinfectant.

15 Amazon Purchases That We Are Loving Right Now
15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

11 Things You Should Never Buy Without a Coupon
11 Things You Should Never Buy Without a Coupon

With just a little planning, you can save money on numerous everyday purchases.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.