How to Prevent Check Fraud

Even though people are using checks less often, that doesn’t mean check fraud is any less common. In 2018, $15.1 billion was lost on check fraud. In this article, we discuss all of the various forms of check fraud that exist so you can avoid the obvious signs and make sure you are prepared against some of the more common types of fraud. Continue reading to learn more about proper check writing and how you can avoid becoming a victim to check fraud. 

What Is Check Fraud?

Check fraud refers to any type of scam that involves false, altered, or unacceptable checks. Check scammers might send an altered check with the payment amount or payee changed. They might also use a counterfeit check, one that has been forged, or drawn on closed accounts. All of these schemes play off a law that requires banks to make money available to account holders within a few days. It can take weeds to identify a fraudulent check. At that point, it’s too late. So how do you prevent becoming a victim of check fraud?

What Are the Different Types of Check Fraud?

Check frauds can take many different forms. Often, your scammer will send you a fake or bad check to deposit and they will ask you to send some of your own money back before the bank fully processes the deposit. Here are the most common forms of check fraud. 

Lottery or Inheritance Claims

Scammers might contact you saying something outrageous, such as that you won the lottery or another prize. They might also tell you that you’ve received an inheritance. They might send you a fake cashier’s check for an abnormal amount of money and ask you to pay for the taxes on the lottery and the winnings. 

Overpayment Scams 

Someone might pretend to buy something from you online and send you a check for more than the asking price. Then they will ask for the overpayment amount back. 

Mystery Shopping Schemes

In this scheme, a person will contact you claiming that to be an organization looking for mystery shoppers. They will send you a check to deposit in your personal account and ask you to transfer some of the money elsewhere. 

Unsolicited Check Schemes

In this check fraud scheme, you might receive a check in the mail you weren’t expecting for a few dollars. You might expect it to be a rebate on something you bought. In reality, it will be a fake check scam. By cashing the check, you might be unknowingly signing up for a membership or taking out a loan that will draw on your account every month. 

Who Do Check Fraud Scams Target?

People of all ages can be a target of check fraud. However, younger adults are more commonly affected by check scams. Part of this may be because younger adults aren’t used to writing checks, which makes them easier targets. People in this age group are reported to be losing more than any other type of scam. 

How Could Check Fraud Affect You?

If you deposit a check that turns out to be fake, you likely won’t be able to recoup the money you lost from the scam. The median amount lost in check fraud is around $2000, which is higher than most other types of fraud. 

You might also be at risk of other types of fraud if you are the victim of check fraud. For example, check fraud makes you more susceptible to identify theft. If this is the case, you will need to put a fraud alert on all of your credit reports. This could lead to delays when you apply for a loan or other form of credit. Fraud alerts require businesses to verify your identity before extending credit. 

What Are the Signs of Check Fraud?

If you’re concerned that an offer is fraudulent or that you’ve been given a fake check, you should check for the following red flags: 

You’re Asked to Buy Gift Cards or Send a Money Order

This is a common trick. People trying to fraudulently obtain money will ask victims to purchase gift cards and read back pins to them. Others will ask for a money order. Doing either is similar to sending cash and it will be next to impossible to get your money back. 

You’re Being Asked to Receive a Prize 

In this scenario, whoever tries to get you to pay for winning a prize should be an immediate tip-off that something is amiss. You should never have to pay for winning a prize and if you see this, there is no way the party is legitimate. 

You’re Paid with a Check for More Than You’re Owed

If you ever find yourself getting paid more than you’re owed, it’s an immediate tip-off that whoever is offering the payment is fake and you shouldn’t accept it. 

You’re Asked to Send Money Overseas

Oftentimes scammers will ask for you to pay money overseas. If this is the case, you should avoid the scammer at all costs. 

How Can I Avoid Check Fraud?

After avoiding the red flags of check fraud, there are some additional steps you can take to ensure you avoid becoming a victim of fraud. You should never accept a check from someone you don’t know for purposes that you don’t understand. Avoid wiring or sending money to strangers, whether they are individuals or a company. Avoid cashing checks you aren’t expecting and verify a cashier’s check is valid before depositing it. 

Make Sure the Issuing Bank Is Real

Scammers might use the name of real banks without being real. They might also make up the name of a financial institution to use a fraudulent check. You can use the FDIC’s BankFind to determine if the financial institution is real or not. 

Check with the Bank to See if the Check Is Valid 

You can look up the listed bank’s information to determine if the check you received is real. If it’s an official website, you will be able to locate their actual phone number and contact information on their website. Avoid using whatever information is listed on the print.