Legal Definitions - cold check

A cold check is a common term for a bad check or a dishonored check. It refers to a check that a bank refuses to pay because the account on which it was drawn does not have sufficient funds to cover the amount specified, or because the account has been closed. Writing a cold check can lead to various consequences, including bank fees for both the writer and the recipient, civil liability for the amount of the check plus damages, and in some cases, criminal charges, particularly if there was an intent to defraud.

Here are some examples illustrating the concept of a cold check:

• Example 1: Utility Bill Payment

  Imagine Maria writes a check to her electricity company for her monthly bill, believing she has enough money in her checking account. However, an unexpected car repair bill that she paid with her debit card clears first, leaving her account balance too low to cover the electricity check. When the electricity company deposits Maria's check, her bank will return it unpaid due to insufficient funds. This check is considered a cold check because there wasn't enough money in Maria's account to cover the payment at the time it was presented.

• Example 2: Business Transaction

  A small bakery owner, Mr. Henderson, writes a check to his flour supplier for a large order of ingredients. He anticipates a significant payment from a restaurant client to clear his account before the supplier's check is deposited. Unfortunately, the client's payment is delayed, and when the flour supplier attempts to cash Mr. Henderson's check, the bakery's account lacks the necessary funds. The bank will then reject the check, making it a cold check. This could result in fees for Mr. Henderson and potentially strain his relationship with the supplier.

• Example 3: Personal Loan Repayment

  Sarah borrows $200 from her friend Tom and promises to repay him the following week. She writes Tom a check for the amount, but forgets that she recently made several large online purchases that have not yet fully processed. By the time Tom deposits the check, Sarah's account balance has dropped below $200. Tom's bank will inform him that the check cannot be honored due to insufficient funds in Sarah's account. This check is a cold check, and Sarah would likely incur bank fees and need to find an alternative method to repay Tom.