Check Cashing Scams

With check cashing scams, some one sends you a check and has you cash it with your bank and then send them back the excess money. It is later that you discover the check is fraud and your bank then debits your account for the entire amount.


A common way this is done is during the purchase of an item from a site such as craigslist or other classified site. The way this scam works is that you list something for sell. A buyer makes you an offer and then sends you a check. Say the item is for $100 plus shipping. They send you $200 and tell you to subtract shipping costs and send the item and the balance back to them. A couple of weeks later, the check is returned as fraud or non-sufficient funds. Your account is now deducted $200 and you are out the item, the shipping costs and the difference you sent them. Plus your bank may have charged you bad check fees.

That was a minor example. It has happened often for $100s or $1000s of dollars when it involves property rental or automobiles.



Check Cashing Scams are also used a lot against businesses. In fact, businesses can be easier targets of Check Cashing Scams. Sales can receive an order with a check. After the order is shipped, the customer immediately returns the items requesting a refund. If a refund is issued and the refund check is cashed before the payment check is completely processed, the thief keeps the money. This is one important reason why many business put up to 10 business day holds on orders payed with checks. Even PayPal places holds on payments that involve checking accounts.

You may be wondering how this can happen. You take a check to your bank and deposit it. The bank makes the funds available to you in 1 to 5 business days and you think everything is okay. Well it is not, maybe. The actually processing of checks can take several days, especially the farther apart the banks may be located. Checks are 'processed' by sending the information to regional centers. At this centers, all the credits and debits for each member bank are added up. If a check submits for total money in deposited checks then all the other banks submit to be charged to the bank, the bank has a net income. Obviously, if more checks are submitted against the bank then the bank cashed on behalf of other banks, the bank will owe money. When the checks being processed are processed out of different centers, it take longer for the check to make it to the target bank. If the account attached to the fraudulent check does not have sufficient money the check is refused. However, most banks have an automatic 2nd try for checks that are returned to them. If your bank resubmits the check, it is now additional time for the check to go back thru the system. When the check comes back the second time, your account is then debited the fraudulent amount.

The best protection for Check Cashing Scams is primarily to not accept checks from people you do not know. If you sell on craigslist or other online sites, do not accept checks. If you do accept checks for any reason, if the "buyer" does request a refund, explain that you have a 30day hold before you ship anything or provide any refunds.

Thieves will put as much effort into stealing your money as you put into earning it. Protect your bank account.