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How to Prevent Check Fraud and Avoid Check Scams

By: Dani S.
Posted on: 08/04/2021

If you have touched a check in the past year— or ever!— this blog is for you!

At face value, writing and cashing checks is harmless; it’s been a standard practice in personal finance for decades. However, the longer these practices have been around, the more creative fraudsters have become.

Ultimately, fraudsters want to steal your money, and there are a variety of ways to do so:

  • Stealing your checkbook and forging checks to cash
  • Gathering personal information so they can steal your identity
  • Manipulating you into cashing a fraudulent check and sending a portion back to them— leaving you to pay the full amount once your financial institution identifies the fraudulent check
  • And so on and so forth…

There are two sides to the check fraud/scam coin: 1) everyday best practices to prevent check fraud, and 2) check scam red flags to identify when cashing a check.

Everyday best practices to prevent check fraud

Protect your information

According to LifeLock, “every time you write a check to someone, you’re handing them the information they need to commit check fraud—with you as the victim,” and fraudsters have countless strategies to find this information even if they can’t get a hold of one of your checks.

To commit check fraud, fraudsters need the following information: your name, address, phone number, financial institution’s name, account number, routing number, and signature. (LifeLock).

Consider the life cycle of ANY document with your personal information on it.

    • When and where did it come from?
    • What kind of information is listed on it?
    • Where do you keep it while in your possession?
    • How and when do you dispose of it?

Purchase a lockbox or safe to store any documents that contain personal information.

Consider bolting it to the floor if it’s light enough to be carried. If you rarely use your checkbook, keep it stored in here too.

Properly vet any home visitors, especially those who are unattended.

Examples of visitors include housekeeping, contractors, repair services, etc. It doesn’t hurt to keep valuables locked up even if you’ve vetted your visitors. Better safe than sorry!

Shred documents that contain personal information when you no longer need them.

Delivery services (i.e., UPS and FedEx) and office supply stores (i.e., Office Depot and Staples) offer paid shredding services. Many local financial institutions (including FCCU) offer free shred events throughout the year.

Protect your checkbook

Think of each individual check as an opportunity for a bad actor to commit check fraud. 25 stolen checks = 25 fraud attempts.

Rarely use your checkbook? Leave it at home.

Checkbooks can be stolen out of purses, bags, and cars. Tear out individual checks to bring with you instead of bringing the whole checkbook. Remember: each individual check is an opportunity for a bad actor to commit check fraud.

Lock it up.

When you’re not actively using your checkbook, keep it locked in a lockbox or safe.

Avoid mailing checks from your mailbox.

If you need to mail a check, go to the post office. This minimizes the risk of it being stolen from your mailbox. Otherwise, place it in your mailbox right before USPS arrives.

Monitor your checking account

Set up text or email alerts.

This is a best practice for any consumer, regardless of if they use checks. It’s important to learn your own spending patterns so that fraudulent transactions stand out like a sore thumb. For check users specifically, set up a custom alert for when a check clears your account for a certain denomination.

Check scam red flags to identify when cashing a check

Bottom line, YOU are responsible for paying back ANY check cashed on your bank account. Consider the following situation:

You receive a letter in the mail claiming that you won a sweepstakes. The letter contains a check and instructs you to cash the check and send a portion of the earnings back to cover taxes. You go to your financial institution, cash the check, and send the money as requested (via money order, gift cards, wire transfer, etc.).

You don’t think much about it because your financial institution took the check and released the funds to you almost immediately. Several weeks later you get a phone call from your financial institution notifying you that the check was fraudulent and that you’re responsible for paying back the full amount.

… but you already sent the tax money back and spent the rest? What do you do?

In most situations, there’s not much you can do. The FTC has some last ditch efforts you can explore to get your money back, but it’s unlikely. You’re going to have to find the money to pay back your financial institution.

Here are some red flags that often appear in real-life situations similar to the one depicted above:

You were unexpectedly sent a check in the mail.

Don’t know the sender? Don’t cash the check. Especially watch out for fake prize, sweepstakes, and lottery scams and online buyers “accidentally” overpaying you for an item and asking to for a portion of the check back.

You were given a check and asked to cash it, then you are asked to send a portion of it back in the form of 1) a money order, 2) wire transfer, or 3) gift cards.

The first two of these payment methods seem common. Anytime you’re asked for a money order or wire transfer, investigate further to ensure you’re not being scammed.

But gift cards? Really? The FTC said it best, “gift cards are for gifts, not payments.” Many fraudsters will ask you to purchase gift cards (i.e., Google Play or iTunes) and email the gift card number and PIN to them.

All three of these payment methods are like cash, once it’s out of your hands, it’s gone. There’s ALMOST nothing you can do to get your money back (Keyword: “almost.” Check out what the FTC suggests doing).

You were sent a check as a sweepstakes prize, but you were instructed to send a portion back to cover taxes, shipping and handling, or processing fees.

Check out more information on fake prize, sweepstakes, and lottery scams here.

You were sent a check for selling something, but the amount is “accidentally” over asking price.

Check out more information on online auction scams.

 

Check out the resources used to write this blog for more examples and details on check fraud and check scams:

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