Different Types of Check Fraud
Paper Hanging
Paper hanging is when someone knowingly writes a check that won’t clear, known as a bad check. This method takes advantage of the “float” time between when a check is accepted and when the funds are deposited. By the time the payee discovers that the check has bounced, the payor is long gone.
Check Washing or Cooking
Check washing involves stealing a check and “washing” away the ink — minus the payor’s signature. This allows the thief to make the check payable to themself or an accomplice, and to manipulate the dollar amount that’s provided.
Check cooking follows the same basic principles but involves scanning and digitally altering the check instead of washing away the ink.
Check Forgery
Check forgery occurs when a blank check is stolen and fraudulently filled out, including a forged signature of the payor. In some cases, instead of stealing a check, the thief simply writes out forged information onto a blank check that’s been printed out.
Preventive Measures
Now that you understand the different kinds of check fraud, you can start thinking about how to protect yourself. Although criminals can get pretty clever with their schemes, there are several ways to prevent check fraud. Here are some of the best check fraud prevention tips:
Secure Your Checks
Always store your checks in a secure location. This will help prevent burglars, service workers and even house guests from stealing them. Finding a good storage location will also help you stay organized while alerting you to the fact your checkbook is missing should it ever disappear from that location.
Enhance Your Security Measures at Home
Don’t leave checks — deposited or undeposited — sitting around your home, even if they’re placed in a drawer or cabinet. Should these checks ever get into the wrong hands, they could be used for fraud. Instead, make sure to cash your checks as soon as possible, and destroy them once the funds have been distributed.
It’s also a good idea to consistently monitor your checking account, reviewing your transactions to ensure there are no suspicious charges. While this won’t prevent check fraud, it can help to catch any fraudulent activity soon after it's committed.
A great way to prevent check fraud? Write less checks.
This may sound like an oversimplification, but these days it’s possible to pay most of your bills — if not all of them — online. As long as you’re using a secure website and internet connection, online payments can be a great way of reducing fraud. It will effectively remove your checks and bank information from the mail, or wherever else your checks may end up.
Be Cautious When Mailing Checks
If you have to mail a check, take proper precautions. Mail theft is on the rise, according to the United States Postal Service. Mail can be stolen from the traditional blue drop boxes, USPS or contract carriers, or right from your own mailbox.
If mailing a check, use secure envelopes, do not indicate anywhere what is in the envelope, and if possible, hand the envelope directly to a mail carrier or drop it in a secure location or mail processing facility.
Banking Safely: Partner With Your Credit Union
Partnering with the right bank or credit union can serve as another layer of protection against not only check fraud but all types of fraud. These institutions can provide resources and services to help prevent fraud and to catch it quickly if it does occur.
DCU, for example, has a ton of fraud prevention resources, including articles, videos, and podcasts. You can also set up alerts to flag suspicious activities, giving you real-time monitoring of your account. The DCU mobile app offers an easy way to report any unauthorized spending, so you can take quick action against fraud.
Educating Yourself and Others
As great as your bank or credit union may be, it’s still important to keep up with the latest check fraud schemes and prevention methods. This is especially true if you’re a business owner, a bookkeeper, or anyone who has to issue a lot of checks. Make sure that your family, friends, or anybody who you exchange checks with is educated on check fraud. This will help to protect both parties.
Signs You Might Be a Victim of Check Fraud
The most obvious sign of check fraud is unexplained transactions. If you come across a payment that you simply can’t explain — especially a large one — it’s a major red flag. That’s why monitoring your account is so important, making sure that all your transactions are correct.
Another common red flag is missing checks. While your checks may simply be misplaced, they could also be stolen — to be used later for check forgery. Once checks go missing, work to find them as soon as possible. Continue to closely monitor your account to make sure no check fraud is committed.
When Things Go Wrong: Responding to Check Fraud
If you do experience unexplained transactions, take some time to ensure that the charges are actually fraudulent. It may be possible that you forgot about a payment, a check has been legally cashed or deposited after a lengthy delay, or somebody sharing your account made the transaction.
After your investigation, you must take immediate action if the transaction still remains unaccounted for. Notify your bank or credit union of the situation, and work with them to inform your next course of action.
Turn to DCU
Check fraud can be scary to think about, but educating yourself, taking preventative actions, and partnering with the right financial institution can reduce your risk of being a victim.
Ready to start banking online? Avoid check fraud through our DCU’s Digital Banking, which is quick, easy, and secure. Check out our Digital Banking 101, then consider applying to become a valued DCU member.
This article is for informational purposes only. It is not intended to serve as legal, financial, investment or tax advice or indicate that a specific DCU product or service is right for you. For specific advice about your unique circumstances, you may wish to consult a financial professional.
