Today, it’s virtually impossible to find an adult without a checking account. It’s one of those essentials in day-to-day life to handle money safely and conveniently, whether you want to receive funds or make a purchase.
Of course, keeping account numbers and credentials safe is a priority for many people to ward off financial theft. But there are many other issues you could face with your checking account. One such event is a fake check deposit. If you don’t watch out, it could potentially leave you with fees, fines, and even criminal charges.
Fake check scams are just as prevalent as tax identity theft, charity fraud, lottery scams, and countless other schemes that target victims for financial gains. So, in this article, we’ll take a look at what exactly is at stake when someone deposits a fake check into your bank account and what you can do to protect yourself from its harmful consequences.
What is a fake check scam?
A fraudulent check could typically end up in your account in one of two ways: a fraudster could deposit it or may convince you to do it yourself. Either way, the outcome is the same. The check will often get cleared within one or two days, and you’ll use up part or all of it.
But in reality, it could take a few weeks for your bank to receive funds from the check-issuing bank. And if the check is fake, the paying bank will return it and refuse payment. That’s when trouble erupts.
Based on Federal Trade Commission estimates, fake check scams have surged by as much as 65% since 2015. The problem is that scammers and racketeers work with sophisticated technology. So, identifying a fake check could be extremely difficult for your bank. As a result, it could take quite a while before they get flagged. And by that time, the scammers would have already done the damage.
What could happen if someone deposits a fake check?
So, what are the potential consequences of someone depositing a fake check into your bank account? Here are the most common outcomes. But keep in mind that the real damage could depend on how you have utilized the funds by the time you and your bank identify the scam.
Freezing and closure of your account
Your bank may freeze or even close your account in the event they identify a fake check deposit. Of course, the exact action a bank will take will differ between each financial institution based on their policies. Depending on their investigations and your track record with them as a customer, they’ll determine how they’ll treat your account and its funds in the long term. But a sudden account freeze or closure, even for a short period, could cause severe disruptions in your daily life.
Fees, fines, and financial loss
If you had withdrawn funds before the check bounced, then your bank could hold you liable for all payments made. Depending on the bank policy, you may need to return what you have withdrawn to avoid penalties, even though you’re a scam victim. If it means you have overdrawn your account, then you’ll end up with an overdraft fee as well.
And on top, it could affect your regular bill payments, too. For example, an overdrawn or frozen account may prevent you from paying your bills on time. As a result, your lenders and service providers could slap you with additional late payment fees.
Damaged financial reputation
If your bank suspects you of having some kind of involvement in the fake check scam, they could report you to checking account screening companies like ChexSystems. As a result, a bad record with these firms could affect your ability to open a checking account with other financial institutions in the future.
In addition, missing payments as a result of an account freeze or an overdrawn account could reflect badly on your credit scores, too. Non-payments and late payments are key criteria that influence how credit bureaus determine your credit score. And a poor credit score could have many damaging repercussions years into the future. For instance, lenders might refuse loans and credit lines, and landlords could refuse to let their properties to you.
Tackling fake check scams
Now, you can avoid all these repercussions if you can detect a fake check deposit before your bank does. But these check scams are hard to recognize. And if your bank has trouble identifying a phony check, then you have little chance of flagging them yourself.
Having said that, you could still spot certain red flags by monitoring suspicious activity. For instance, one of the common ways you could get caught in a check scam is when someone deposits an amount in excess of what they owe you. When this happens, the fraudster would typically ask you to wire transfer the additional amount.
Another popular scam is fraudulent lotteries and sweepstakes that offer prizes as check deposits. In return, you’ll be required to wire transfer a tax or processing fee to a racketeer’s account.
Unsuspecting victims would make these transfers without realizing that what shows as a cleared check in their account is, in fact, still pending payment from the check-issuing bank. In the end, they could not only lose money but may even get entangled in a criminal investigation. However, by watching out for these frauds, you could quickly notify your bank of a possible scam and prevent its costly consequences. If a person’s full name or any other identifiable information is mentioned on a check or somewhere else, run a background check on them on Nuwber to learn more about them.
In addition, as a general rule, verify with the check-issuing bank before depositing any checks. And wait until they rightfully clear it before withdrawing any funds. However, if you’ve fallen prey to a fake check scam, immediately notify your bank, the Federal Trade Commission, and the local police. Taking quick action to inform relevant authorities is critical to avoid grave outcomes and clear your name from criminal charges.