Bounced Cheques and NSF Payments in Ontario: Your Options

A cheque “bounces,” or is returned NSF (non-sufficient funds), when the bank it’s drawn on declines to pay it — most commonly because the account didn’t have enough available money at the time the cheque was processed. The bank doesn’t cover the shortfall on the payor’s behalf; instead, the cheque is simply returned unpaid, and the money that was supposed to change hands never actually does.

It’s worth being clear about what a bounced cheque doesn’t do: it doesn’t erase or forgive the underlying debt. If a cheque was written to pay an invoice, rent, or any other amount owed, that amount is still owed after the cheque bounces — the bounced cheque is simply a failed attempt at payment, not a resolution of the obligation itself.

There are a few common, generally innocent reasons a cheque bounces — a timing mismatch between when funds were expected to arrive and when the cheque was processed, a simple miscalculation of an account balance, or a bank error. There are also less innocent reasons, ranging from carelessness to a deliberate attempt to delay payment, and occasionally, in rare cases, outright fraud. Figuring out which situation you’re likely dealing with shapes which response makes the most sense.

It also helps to remember that a bounced cheque is, functionally, just a failed attempt at payment rather than a separate, new kind of obligation. The debt it was meant to satisfy — whether an invoice, rent, a loan repayment, or anything else — simply reverts to being an ordinary unpaid amount, to be pursued the same way any other unpaid debt would be if it isn’t resolved informally between the two sides.

Bounced cheques typically come with fees, and importantly, they can apply on more than one side of the transaction. The payor’s bank commonly charges them an NSF fee for returning the cheque unpaid. Depending on the recipient’s own bank, a fee can sometimes also apply to the recipient for depositing a cheque that turned out to bounce, even though they did nothing wrong.

These fees vary between financial institutions, so there’s no single fixed amount that applies everywhere — checking your own bank’s current fee schedule is the most reliable way to know exactly what a bounced cheque costs on your end. Many people are surprised to learn their own bank charged them something simply for attempting to deposit a cheque that later turned out to be NSF.

When pursuing the amount owed, it’s generally reasonable to include your own bank’s NSF fee as part of the total being claimed back from the payor, since it’s a direct, out-of-pocket cost caused by their failed cheque. Some contracts or invoices also specify an additional handling fee for a returned cheque, which can be included as well if it was properly agreed to in advance.

It’s worth distinguishing between the NSF fee your own bank charges you, and any separate fee the payor’s financial institution charges them for the returned cheque. Only your own out-of-pocket cost is something you’d typically seek to recover from the payor — their bank’s fee to them is between them and their own bank, and isn’t generally something you’d add to a demand for payment.

For the large majority of NSF situations, the path to recovering the money is the same general civil process used for any other unpaid debt. A good first step is simply contacting the person who wrote the cheque directly — many bounced cheques get resolved this way once the payor is aware and arranges an alternative payment method, such as e-transfer, cash, or certified funds.

If a direct conversation doesn’t resolve it, a written demand letter is the usual next step — identifying the amount owed, referencing the specific bounced cheque and any NSF fees incurred, and setting a clear deadline for payment. Our guide to debt collection in Ontario covers how this kind of escalation generally works for an unpaid debt more broadly.

Where a demand letter doesn’t produce payment, pursuing the amount in Small Claims Court is generally available for an amount within its monetary limit, with the returned cheque itself serving as straightforward, compelling evidence of what’s owed. As with any judgment, actually collecting on it afterward may still require separate enforcement steps if the debtor doesn’t pay voluntarily.

It’s worth addressing this directly, without being alarmist: writing a cheque while knowing there are insufficient funds to cover it can, in certain egregious or clearly fraudulent circumstances, potentially raise criminal issues under Canadian law. This generally relates to situations involving a deliberate intent to deceive — for example, someone systematically writing cheques they know can’t be honoured as part of an ongoing scheme to obtain goods, services, or money dishonestly.

This is quite different from the ordinary, far more common NSF situation — a genuine timing mismatch, an honest miscalculation, or an unexpected cash-flow problem. The vast majority of bounced cheques involve nothing resembling criminal conduct, and treating every NSF cheque as a potential crime isn’t realistic or helpful. Where there’s a genuine concern about deliberate fraud rather than an ordinary NSF situation, that’s a matter for the appropriate authorities to assess, not something this general guide can determine for a specific case.

In practice, the clearest signal that a situation is purely civil, rather than anything more serious, is an honest explanation and a willingness to make things right once the bounced cheque is flagged. A payor who responds promptly, explains what happened, and arranges payment another way is behaving exactly as you’d expect in an ordinary NSF situation, which describes the overwhelming majority of bounced cheques in practice.

If you’ve received a bounced cheque, a sensible first move is confirming with your own bank exactly why it was returned, since the specific reason can shape your next step. From there, reaching out to the payor promptly — before escalating to a formal letter — often resolves the situation quickly, particularly if it was a genuine oversight on their part.

If you’re the one whose cheque bounced, acting quickly and transparently tends to produce the best outcome: contact the recipient, explain what happened, and arrange payment through another method as soon as reasonably possible. This kind of prompt, straightforward response often prevents what might have been a one-off, innocent mistake from escalating into a more serious collection matter.

Going forward, both sides of a transaction have reasonable ways to reduce the risk of a repeat NSF situation. A business that has received a bounced cheque can reasonably require a different payment method — such as e-transfer, certified funds, or cash — from that particular payor afterward, without this needing to feel punitive.

Someone who has had a cheque bounce can similarly take steps to avoid a repeat, such as keeping closer track of account balances relative to outstanding cheques, or simply switching to electronic payment methods that confirm funds availability at the moment of payment rather than relying on a cheque that clears days later. For broader context on how an unpaid amount typically escalates if it isn’t resolved informally, see our Money & Enforcement hub.