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The convenience of credit and debit cards as well as electronic banking services have caused consumers to use fewer checks. Yet check fraud is still a major threat that costs millions of dollars a year to its victims. Both individuals as well as businesses are at risk from check fraud.
A study by Bluepoint Solutions found that although check writing volume in 2015 was at an all-time low, the loss per check is now twice the level it was back in 2003 when check writing volume was more than double the current level. In other words, check writing volume is less than half of what it was in 2003, but loss per check due to check fraud has more than doubled.
What is Check Fraud?
All forms of check fraud intend to defraud the consumer out of cash while taking advantage of the relatively long time it takes for financial institutions to clear check transactions.
Here are a few examples.
Someone may offer to buy an item you have listed on an auction site but will overpay with a false check and ask you to provide cash for the difference.
You may be the victim of a work-at-home scheme in which you purchase supplies and training materials, but the reimbursement check from the company is a fake.
The point is there are many forms of check fraud schemes, and the best protection is to be careful about accepting a check from any person or business you don’t trust.
What Should You Do If You Suspect That a Check is a Fake?
If you suspect that a check is fake, the first thing you should do is examine the actual check closely.
Is there something missing or something that just doesn’t look right about it? Pay attention to misspellings and items that look out of place. Look to see if there is a signature on the check and if the name and address match the personal contact information you have for the issuer.
Checks often include the bank logo and address, but it could be a sign of a fake check if these items are missing along with the bank name.
The first set of numbers at the bottom of a check correspond to the bank’s routing number. You can search online to see if that routing number matches the name of the bank on the check.
Some checks also have security features such as watermarks that are missing on fake checks. You may even want to have a bank manager at your local bank examine the check to see if they notice anything suspicious.
What Actions Can You Take If You Believe You Have a Fake Check?
The most important thing you can do if you suspect you have a fake check is to not use the money. Do not use the money or ship a product until you can verify if the check is fraudulent.
Banks generally have a policy of making funds available within a couple of days from check deposits. Those funds, however, generally take longer than that time to go through the check clearing process between financial institutions.
So if you spend the money before the check clears, you may be surprised to find your account balance is much lower than you expected when the check bounces.
Make sure to discuss your concerns with your bank ahead of time, and ask how long it will take to find out if the check actually clears. Finally, if you discover you have been the victim of check fraud, consider contacting the authorities at your bank, police department, the Federal Trade Commission, or the FBI.
Author: Jeff Gitlen
Jeff Gitlen writes about a wide range of finance topics including everything from student loans to credit cards to small business financing. Jeff's work has been featured on a number of sites including Bloomberg, CNBC, Forbes, Market Watch, and more.