NSF checks, or non sufficient fund checks, are a serious problem for the people who write and accept them--but not for banks. The banking industry makes about $5 billion annually from the 450 million NSF checks that get written each year. While banks charge up to $30 to process a bad check, it costs less than a dollar to actually do it.

Outside the banking community, NSF checks aren't so profitable. Banks and merchants levy fees on the people who write bad checks, and the retailers who accept them are out that much money. They also have to divert staff to track down the funds, and many times they simply can't; they have to take a loss on that transaction.

Solving the Problem of NSF Checks

The simple solution for people who write bad checks is to keep better records. Keep your checkbook updated. Include all online, ATM, and automatic deductions. If your checkbook isn't balanced, it's going to break your heart--and your wallet. Keeping on top of what is in your account is the simplest and most effective way of avoiding writing a bad check.

Retailers and merchants don't have it quite as easy. They have to be more diligent; buying a check verification system is a great start. There are also financial services that can recover funds from bad checks--some even do it without any fees or set-up costs.