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What Is Check Fraud? Protect Yourself From Scams

Chime Team • February 28, 2022

Writing checks in the digital age may seem like a payment practice from a bygone era. But Americans wrote about 3.4 billion checks last year,¹ and those payments are increasingly being targeted by bad actors. According to the U.S. Department of Treasury’s Financial Crimes Enforcement Network, check fraud instances nearly doubled last year, increasing from 350,000 in 2021 to 680,000 in 2022.²

Just as payment technology is evolving, so are the methods of criminal deception. Check fraud is a malicious practice that can pose a threat to your bank account. Increasingly sophisticated scams require proactive measures to protect yourself from check fraud.

What is check fraud?

Check fraud includes any illegal use of paper or digital checks, like writing bad checks and stealing, altering, or forging checks. Counterfeit checks are sometimes printed with the name and address of a legitimate financial institution and include what appear to be legitimate account numbers. In some cases, stolen checks are used, or fake checks are created with account information from someone whose checking account data or identity has been stolen.

Because counterfeit checks look just like real checks, they can trick recipients and bank employees. A variation on check fraud involves payment scams in which scammers convince people to make bogus payments, often as a refund for overpayments made with a bad check.

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Types of check fraud

Check fraud is historically related to account holders or criminals writing bad checks. But today, victims of check fraud range from people whose accounts have been compromised to those who have been duped into making bogus purchases or refund payments. 

Did you know? Since the pandemic, there has been a considerable increase in instances of checks being stolen from mailboxes. The Financial Crimes Enforcement Network saw the number of Suspicious Activity Reports (SARs) for check fraud nearly double between 2021 and 2022 as bad actors continue to target mail.²Consider sending funds through peer-to-peer payment apps or electronic methods if you have the means. 

Some common types of check fraud include, but are not limited to:

  • Paperhanging: Purposely writing bad checks without sufficient funds in your account is a type of fraud known as “paperhanging.” People who accept checks that bounce are often victims of paperhanging.
  • Check forgery: Another form of check fraud involves a scammer who forges your signature on a stolen check and cashes it, walking away with your money. A variation on this is a check cashing scam that involves faking your endorsement on a valid or counterfeit check made out to you and then cashing it.
  • Check kiting: When someone writes bad checks from their bank account and deposits them in another account and/or at a different financial institution. This scam takes advantage of the “float period” between when a check is deposited and when the funds are collected from the sender’s bank.³
  • Overpayments: Many variations of check fraud take advantage of the float window. One of the most common scams is when someone overpays you and then asks for a refund. For instance, the swindler overpays you with a bad check, you refund the overpayment, and by the time you and your bank realize the initial payment was bad, the defrauder has disappeared with your money.
  • Money order fraud: This involves using a check to fund a payment via a third-party wire transfer service like Western Union®. Once you pay someone with a money order, it’s like sending them cash. These types of wire transfers are almost impossible to recover once completed.
  • Employment scams: Another form of check fraud involves fake jobs, often for mystery shoppers and personal assistants. This scam may start when you get hired for a dubious job in which your new “boss” sends a bad check that you are told to deposit in your account. You might be instructed to use some of that money to buy gift cards as part of your first mystery shopping assignment. The gift card scam typically involves sending pin numbers to your “fake” boss, who uses them like cash. By the time the initial check you deposited bounces, the fake employer has vanished, and so has whatever portion of the deposit you spent. Variations of this scam include buying gift cards or cryptocurrency that you send to a third party as part of a bogus job.

5 ways to identify check fraud scams

Identifying check fraud can help protect your finances. Looking for physical alterations on paper checks and monitoring your transactions regularly can help you identify check fraud scams.

Any job requiring you to spend your money is another warning sign of potential fraud.

Some best practices for identifying check fraud include:

  1. Look for signs of alteration: Any discrepancies or changes on a check indicate it may have been tampered with.
  2. Examine security features: Genuine bank checks are printed on high-quality paper and often include security features like watermarks and microprinting. Missing security features, low-quality paper, inconsistent fonts, and other mismatched physical characteristics can be a tip-off that something is wrong.
  3. Question requests for personally identifiable information: Receiving unsolicited emails, phone calls, or text messages claiming to be from your financial institution are red flags that someone may be trying to steal your account information. Bad actors often impersonate banks to obtain your personal information, like your Social Security number, account number, or password.
  4. Beware of phishing emails: Phishing emails that appear to be from your bank may include links to fake websites that are designed to steal your login credentials. Receiving unsolicited emails from your bank and suspicious links and attachments from unknown sources are often a gateway to check fraud.
  5. Regularly review transactions: Suspicious or unknown transactions on bank statements and online banking registers can be another sign that your account has been compromised. Look for even minor discrepancies because scammers sometimes test an account with small transactions before making larger unauthorized withdrawals.

What to do if you are the victim of check fraud

If you suspect you are the victim of check fraud or notice any unauthorized transactions related to your account, contact your bank immediately. The bank can investigate and help you take appropriate action to secure your account like changing passwords or canceling checks.

Securing your bank accounts and setting up alerts can help protect you from further loss. Most financial institutions offer custom alerts that notify you about any account activity, such as large withdrawals, low balances, or unusual transactions. These alerts can help you to identify suspicious activity.

If you’ve been a victim of check fraud, protect your devices and accounts with new, strong passwords, up-to-date security software, encryption tools, and two-factor authentication (2FA). Enabling 2FA adds an extra security layer by requiring a second form of authentication, like a one-time code that is sent to your cell phone.

Other steps you can take include:

  • Filing a police report that details the incident and enables law enforcement to investigate your case.
  • Maintaining copies of all documents related to potential fraud, like forged checks, bank statements, and any correspondence with scammers.
  • Notifying credit reporting bureaus and/or freezing your credit reports to prevent further unauthorized activities.
  • Remaining vigilant once you have been targeted since you may be at risk for future fraud attempts.

Stay safe from check fraud

Stay cautious when dealing with potential check fraud and scammers who are trying to separate you from your money. Protecting yourself from check fraud starts with preventing bad actors from stealing your checks or account information.

Make sure you can distinguish a real check vs. a fake check. Even checks you deposit via online banking should be properly destroyed. Check our guide on how to void a check the right way for the proper steps.

Chime® is a financial technology company, not a bank. Banking services are provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. The Chime Visa® Debit Card and the Chime Credit Builder Visa® Credit Card are issued by The Bancorp Bank, N.A. or Stride Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit and credit cards are accepted. Please see the back of your Card for its issuing bank.

While Chime doesn’t issue personal checkbooks to write checks, Chime Checkbook gives you the freedom to send checks to anyone, anytime, from anywhere. See your issuing bank’s Deposit Account Agreement for full Chime Checkbook details.

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1 Information from Boston Federal Reserve "Check Fraud Rampant: Fraud Awareness Key to Slowing Surge" as of September 12, 2023: https://www.bostonfed.org/news-and-events/news/2023/08/check-fraud-rampant-mike-timoney-column-fraud-awareness-key-to-slowing-surge.aspx

2 Information from Financial Crimes Enforcement Network (FinCEN) "FinCEN Alert: Nationwide Surge in Mail Theft-Related Check Fraud Schemes Targeting" as of September 12, 2023: https://www.fincen.gov/news/news-releases/fincen-alert-nationwide-surge-mail-theft-related-check-fraud-schemes-targeting

3 Information from Office of the Comptroller of the Currency (OCC) "Funds Availability: When Will Your Deposit Be Available?" as of September 12, 2023: https://www.helpwithmybank.gov/help-topics/bank-accounts/funds-availability/funds-availability-check.html

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