Is that a Fake Check? How to Avoid Check Fraud

Check fraud is a criminal act in which one person convinces another to exchange real money or property for a bogus check. In many cases, the fraudster creates a sense of excitement and urgency, giving their victims very little time to think rationally. By the time the victim realizes what has happened, they may have lost thousands of dollars (maybe even more), with no way to recoup their losses.

The key component to check fraud is that it only works when the victim gives real money to a fraudster before the check has had time to clear with the receiving financial institution. Remember that any check you receive must clear with your credit union or bank before the money is available to you. Checks can take days to clear, so if you withdraw cash immediately after depositing a check, you are actually withdrawing your own money, not the money given to you by the check issuer.

People who commit check fraud often build a relationship with their target before they commit fraud. They build trust over the phone or through social media interactions, assuring their victims that they are a legitimate organization or friend. Fraudsters are extremely adept at generating convincing illusions, but with a little knowledge, you can prevent them from robbing you.

How do people get away with check fraud?

Fraud is always evolving, but check fraudsters tend to rely on a few standard scams. The most popular include:

You’ve won the lottery!—in this scenario, you learn that you’ve won the lottery and the check is on the way. “That’s great!” you think, but it’s strange because you never actually entered the lottery. You call the phone number provided to you and the person on the other end of the line says that “yes, you are indeed a winner!” The person tells you that you will soon be receiving a check, which you must cash immediately, sending the amount back to the lottery to pay taxes on the winnings. Once you do that, they will send you the full lottery check.

“This is perfectly normal,” she tells you and, since you’ve never won the lottery, you believe her. When you receive the check in the mail, you rush to the bank to deposit the check and send the money, that day, back to the “lottery” address. Unfortunately, there was no lottery and the amount you sent back (which could represent thousands of dollars), is now in the hands of the fraudster. Instead of buying the new house or car you were dreaming of, you find yourself in financial straits.

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Need money? Try our low-interest loan—This scheme follows a similar pattern to the lottery scheme. In this scenario, the fraudster asks for your banking information so they can make the loan deposit to your account. Instead of depositing real money, they make a counterfeit deposit for an amount that is higher than the amount you requested and demand that you return the overage. They often indicate the deposit was “more than you qualified for” and you need to return the money immediately. These criminals prey on individuals who may already be in a financial bind and are seeking financial assistance to get them through a difficult time. Unfortunately, this type of scam results in additional debt for the unsuspecting victim.

Oops, I wrote in the wrong amount. Would you send me the change?—this deception can relieve you of your property as well as your money. In this scenario, the fraudster is your customer. You are selling something online or in the newspaper and they get in touch to purchase the item. They send you a check for the wrong amount—more than the purchase price of the item. “Oops,” they say. “I must have written the check for the wrong amount.” Rather than cancelling the check, they ask you to deposit it into your account and return the excess money to them by check, money order, or transfer. If you react quickly, sending the overpayment back to the fraudster, along with the item they “purchased,” you could lose a lot in this scam.

How can you protect yourself from check scams?

The prevailing wisdom, when it comes to any kind of fraud is this: If it seems too good to be true, it probably is. If you are offered something you don’t feel you deserve and your instincts are telling you something is off, step back from the situation and investigate the person or company you are dealing with thoroughly before sending money.

In addition, there are some common red flags that should alert you to fraud before it’s too late:

• The price or deal is too good to be true
• You are asked to wire money
• A sense of urgency is causing you to rush
• The person or institution that has requested the money is unfamiliar to you
• You are asked to pre-pay taxes or fees for a contest or prize

The best way to protect yourself from check scams is to stay calm and never wire money or send cash to people you don’t know or trust. Reputable businesses and institutions will not force you to send money in a hurry. You always have time to research the company that has contacted you.

If you sell things online, examine checks closely and note whether they are made out by the person who requested the item. Make sure the check is made out for the correct amount and, if it isn’t, send it back and request a corrected check before sending the item by mail. You can protect yourself further by using an online payment service and/or accepting checks only from local banks.

One final note: Take your time and think through all of your financial actions. A moment of careful consideration can make the difference between losing thousands of dollars and holding onto it.

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About Steve Timmons

Steve Timmons is our Fraud Coordinator. Steve makes sure that our members’ identities are protected and helps members understand what fraud is, how to identify scams, and how to protect themselves and their family members from being defrauded.

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