How to save your credit score if a cheque bounces

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When a cheque you have given bounces because of insufficient funds, the consequences may go beyond shame. In India, cheque bounce cases can get you legal punishments, bank penalties, and even damage to your credit rating. While one such incident will not immediately ruin your score, multiple occurrences or court cases may have long-lasting effects on your financial health.

Here's what you can do to prevent a bounced cheque affecting your credit-worthiness:

1. Maintain a buffer in your account

The simplest and most optimal way to avoid a bounced cheque is by having enough money in your account. But don't stop with just the cheque amount—reserve for other auto-debits, EMIs, or outstanding credits which can truncate your available funds. Always go through your account statements regularly, and consider enlisting SMS or app reminders to monitor real-time balance.

2. Be reminded about post-dated cheques

Most people forget to keep post-dated cheques for rent, EMIs, or school fees. If your salary is not paid on time or your account balance drops below the amount necessary for that cheque, it will bounce. Keep the date of any post-dated cheque in your calendar and remind yourself a few days before so that your account is financed in time.

3. Never use cheques alone

Online payments like NEFT, RTGS, and UPI are now easily acceptable and give more control and real-time-ness. If you choose electronic transfer, you can avoid the hassles of delayed clearances of cheques or a dishonoured instrument. This also gives you an electronic trail which is simpler to trace and resolve in case of a dispute.

4. Faster communication if the cheque might otherwise bounce

If you anticipate a shortage of funds on the date of clearing a cheque, notify the recipient proactively. Request them not to clear the cheque until a specific later date, or offer an alternative mode of payment. Most recipients appreciate the courtesy and may prefer waiting rather than taking legal recourse or reporting it to credit rating agencies.

5. Clear dues early to avoid legal escalation

Cheque bounce is a criminal offence under Section 138 of the Negotiable Instruments Act, 1881, in India. If the recipient sends a legal notice following a bounce, you generally have 15 days to settle and pay up. Payment can prevent the case from going to court or being reported to a credit bureau—both of which can damage your credit score and reputation.

Why it matters

While banks never report standalone bounced cheque instances to credit bureaus, frequent instances—especially loan repayment or notice at law—may result in harm to your CIBIL or

Experian rating. A negative rating may affect your future prospects for loans or credit cards, or result in higher interest rates and lower credit limits.

By being cautious and following these steps, you can avoid unwarranted penalties and safeguard your economic reputation.