It\u2019s a quirk of human nature that novel things seem more threatening than familiar ones. Driving is more dangerous than flying, for example, but a lot of people who drive in congested cities are reluctant, white-knuckle fliers. They may know intellectually that flying is safer, but it\u2019s not as familiar and therefore not comfortable. <\/p>\n\n\n\n
There\u2019s a similar quirk at play when the time comes to pay for things. For many people, checks are old and familiar, and therefore feel safe, while electronic payment methods feel risky and fraud-prone. The reality is rather different: Checks are an innately insecure payment method, and check fraud is a massive problem for consumers and businesses alike. <\/p>\n\n\n\n
One of the most fundamental rules for avoiding fraud and identity theft is to protect your sensitive information. For example, common pieces of advice include keeping your financial information in a safe or a locked filing cabinet and never giving out your passwords or banking information to random strangers. <\/p>\n\n\n\n
Checks, by their nature, run counter to most security advice. To begin with, they\u2019re pieces of paper that come preprinted with your personal information (full name, address and usually phone number) and banking information; and worse, using them for their intended purpose<\/em> means handing them out to others. Hacking and online identity theft require technical skills, but check fraud only requires access to a physical check, and you give that to somebody every time you use one. <\/p>\n\n\n\n It\u2019s even worse if a scammer manages to secure a check that you\u2019ve used to make a payment. That provides them with a sample signature \u2014 the check\u2019s equivalent of a password \u2014 and, as a bonus, whichever piece of ID the cashier recorded when taking the check (often your driver\u2019s license number). Any check in and of itself can be used to commit fraud, and serves as a useful \u201cstarter kit\u201d for identity thieves. <\/p>\n\n\n\n There are other forms of check fraud, but we\u2019ll start with the ways scammers can use your personal checks for fraud or identity theft. A criminal who\u2019s got one of your checks \u2014 or, heaven forbid, stolen your whole checkbook \u2014 can, for starters: <\/p>\n\n\n\n There are several ways this can happen. Thieves may steal checks directly from a mailbox or take them along with the cash as part of a robbery. A scammer might accept a check from you directly in payment for odd jobs or a small Craigslist purchase, and then alter it. Malicious employees at a business you deal with might physically steal checks you\u2019ve written. The possibilities are endless. <\/p>\n\n\n\n There are many other forms of check fraud that don\u2019t involve your personal checks, and those can be costly as well.\u00a0 In fact, the FTC\u2019s 2020 Consumer Sentinel Network Data Book<\/a> shows that check scams had the highest median cost for consumers, at just under $2,000 per incident.\u00a0<\/p>\n\n\n\n There are a few consistent methods that fraud artists use, changing the details to suit the use case. A few examples are as follows: <\/p>\n\n\n\n This is a common scam you\u2019ll find on Craigslist<\/a> and other selling platforms.\u00a0 Your buyer \u201caccidentally\u201d writes the check for a too-large amount and tells you to just transfer the excess back to them.\u00a0 When the check eventually bounces (it can take weeks after it ostensibly clears), you\u2019re out that money plus the value of the item you parted with.\u00a0<\/p>\n\n\n\n There are several versions of this one. Some purport to be a check from a business you legitimately deal with, while others are variations on the \u201ccongratulations on winning our sweepstakes!\u201d theme. The payoff mechanism for the scammers is the same: After you\u2019ve deposited the check, the sender will claim you\u2019ve been overpaid in error, or ask you to send back \u201cprocessing fees\u201d of some sort. Again, after the check bounces you\u2019ll be out whatever money you\u2019ve sent. <\/p>\n\n\n\n There are a couple of versions of this one too.\u00a0 In one, you\u2019re \u201chired\u201d for a bogus work-from-home job<\/a> and sent a check as a test payment to make sure your payroll information is set up correctly.\u00a0 You\u2019re expected to verify this by sending money back, which of course is gone forever (and you\u2019ve probably given them your banking information as well).\u00a0 In another variant, your supposed job consists of depositing checks and then distributing the funds by wire transfer.\u00a0 The checks, again, are bogus, and you\u2019re on the hook for those amounts.\u00a0<\/p>\n\n\n\n This is a variant of the \u201cnew hire\u201d fraud, and a particularly heartless form of romance scam<\/a>.\u00a0 Your new crush (or in less heartbreaking situations, your new business partner) is out of the country and having difficulty moving money, so would you please deposit this check and disburse the funds by wire transfer?\u00a0 Not only are you on the hook for any amounts you\u2019ve sent, you may actually be helping launder money (and making yourself potentially liable to prosecution).\u00a0<\/p>\n\n\n\n Your concerns with check fraud may begin and end with your own pocketbook, but it\u2019s worth pointing out that it\u2019s also a huge concern for businesses.\u00a0 The 2021 Payments Fraud and Control Survey Report<\/a> from the Association for Financial Professionals shows that a whopping 66% of businesses were hit with check fraud in 2020.\u00a0 That affects us all, indirectly, because the cost of those losses must be made up.\u00a0<\/p>\n\n\n\n It\u2019s especially problematic for banks, of course.\u00a0 A recent study by the American Ba<\/a>nkers Association shows that check fraud accounted for 47% of all fraud losses from deposit accounts, totaling well over a billion dollars.\u00a0 An even more staggering statistic is that the banks stopped over 90% of attempted<\/em> frauds, so this number represents just the small percentage that succeeded.\u00a0\u00a0<\/p>\n\n\n\n It\u2019s a no-win situation for the banks, who are expected to simply make good on the fraudulent losses.\u00a0 Some may refuse to do that, if they believe your own negligence or gullibility<\/a> contributed to the fraud (you can file a complaint with the Office of the Comptroller of the Currency if you aren\u2019t able to resolve things with the bank).\u00a0 In practice, Javelin Research<\/a> has found that only a third of consumers in this situation were happy with how their institution resolved the situation, and 38% closed their accounts as a result.\u00a0<\/p>\n\n\n\n There are several things you can do to limit the risk of falling victim to the various forms of check fraud.\u00a0 As far as your own checks are concerned, the simplest and best method is to just not use them, wherever possible.\u00a0 Electronic payment methods are easier and more widely accepted than ever before, and often let you use biometric security measures such as facial recognition or your phone\u2019s fingerprint reader in place of a password.\u00a0 Wherever possible, set up bills and other recurring payments to be withdrawn from your account automatically.\u00a0<\/p>\n\n\n\n You\u2019ll probably still need to keep checks on hand for some purposes, but keep them physically secure \u2014 ideally under lock and key \u2014 when they\u2019re not actively in use. Many manufacturers make fraud-resistant pens with ink that thwarts removal or alteration, and using one of those for checks is an excellent precaution. Filling out a check properly, with no blank spaces that scammers can take advantage of, also helps (especially in conjunction with a fraud-resistant pen).<\/p>\n\n\n\n When you receive a canceled check from your bank, or deposit a check electronically, be sure to shred the physical item before you put it in the trash. Otherwise, dumpster-diving scammers could still recover it. Finally, and most importantly, keep close tabs on your checking accounts. If you see checks clearing that you didn\u2019t write, that\u2019s a problem. The same holds true when checks you did<\/em> write aren\u2019t<\/em> cashed: Contact the company to verify that they\u2019ve received it, and if they haven\u2019t, you should stop payment on the original check and issue a new one. <\/p>\n\n\n\n The other types of check fraud\u00a0 \u2014 where you\u2019re the one receiving the check \u2014 require different forms of diligence.\u00a0 Sometimes there are physical tells to warn you that a check isn\u2019t legitimate, such as faint traces of other writing hiding behind the letters and numbers you see.\u00a0 Another giveaway is checks from an apparently reputable source that lack the various watermarks, holographs and other security features you\u2019ll find on real checks (with color printers\/copiers as cheap as they are, it\u2019s way<\/em> too easy to copy a check).\u00a0<\/p>\n\n\n\n Before depositing a check that purports to come from a company you already deal with \u2014 especially if it was unsolicited \u2014 contact that company directly to verify that the check is legitimate.\u00a0 For personal checks from an online buyer, use Spokeo\u2019s search tools<\/a> to verify the information on the check.\u00a0 If there are discrepancies in the name, address or phone number, or if the bank doesn\u2019t seem to exist (the FDIC has a tool for checking that<\/a>), those could be big red flags.\u00a0<\/p>\n\n\n\n The best defense of all is simply to recognize the pattern that these scams follow, and not fall for the ruse.\u00a0 Instead, report the fake at the FTC\u2019s ReportFraud.ftc.gov<\/a> website, the office of your state\u2019s attorney general<\/a> and \u2014 if the check came by mail \u2014 the US Postal Inspection Service<\/a>.\u00a0 Instead of falling victim yourself, your input may result in an arrest or at the very least help prevent anyone else from being scammed.\u00a0<\/p>\n\n\n\n Sources<\/p>\n\n\n\n Fox29 Philadelphia: Suspects in Pennsylvania Mail Theft Operation \u2018Washed\u2019 Stolen Checks to Steal Thousands, Police Say<\/a><\/p>\n\n\n\n US Federal Trade Commission: Consumer Sentinel Network Data Book 2020<\/a><\/p>\n\n\n\n US Federal Trade Commission: How to Spot, Avoid, and Report Fake Check Scams<\/a><\/p>\n\n\n\n US Federal Deposit Insurance Corporation: FDIC Consumer News: Beware of Fake Checks<\/a><\/p>\n\n\n\n Financial Industry Regulatory Authority (FINRA): Avoiding Fake Check Scams<\/a><\/p>\n\n\n\n AARP: Romance Scammer Turns Woman Into Unwitting \u2018Money Mule\u2019<\/a><\/p>\n\n\n\n ABA Banking Journal: ABA Report: Banks Prevented More Than $22B in Fraud Attempts in 2018<\/a><\/p>\n\n\n\n HelpWithMyBank.gov: I Just Received My Account Statement and Noticed There Were Forged Checks…<\/a><\/p>\n\n\n\n Javelin Research: Total Identity Fraud Losses Soar to $56 Billion in 2020<\/a><\/p>\n\n\n\n Intuit Mint: How to Write a Check (Step-by-Step Guide to Filling Out a Check)<\/a><\/p>\n\n\n\n US Federal Deposit Insurance Corporation: Bankfind Suite: Find Institutions by Name and Location<\/a><\/p>\n\n\n\n ReportFraud.gov: Report to Help Fight Fraud!<\/a><\/p>\n\n\n\n National Association of Attorneys General: Find my AG<\/a><\/p>\n\n\n\nIdentity Theft and Check Fraud From Personal Checks<\/h2>\n\n\n\n
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Other Forms of Check Fraud<\/h2>\n\n\n\n
Overpayment for a Purchase<\/h3>\n\n\n\n
Other Overpayment<\/h3>\n\n\n\n
The \u201cNew Hire\u201d Fraud<\/h3>\n\n\n\n
The \u201cStuck Overseas\u201d Fraud<\/h3>\n\n\n\n
Check Fraud Is Also a Problem for Businesses<\/h2>\n\n\n\n
Avoiding Fraud Involving Your Personal Checks<\/h2>\n\n\n\n
Avoiding Fraud Involving Third-Party Checks<\/h2>\n\n\n\n