It seems simple enough: Someone sends you a check, you deposit it into your account, and the funds are determined to be valid upon crediting your account. Right? Wrong.
This is a common sticking point for many individuals unknowingly caught up in check-cashing fraud — a scam in which criminals send fake checks to sellers or “employees” for an excess amount, then request the remainder to be wired back to them after the check is cashed. The reality is that it can take days or weeks for a financial institution to verify a check's legitimacy. If it turns out the check is fraudulent, the financial institution will hold the depositor, not the scammer, personally responsible for the funds.
Here’s how it works: Per federal banking regulations, a financial institution is required to make the funds of a deposited check available within one to two business days of the transaction. However, if the check is drawn on an account from another financial institution, it must be sent through a clearinghouse, typically operated by the Federal Reserve Board. Next, it travels back to the financial institution upon which it was drawn on, marking the first moment when a banking professional can analyze the check to determine its legitimacy.
So, just being able to view the funds from a check deposited to your account does not mean they are valid. Even when automated, the process can take over two weeks to verify that the check is indeed issued by the noted financial institution or business.
Check-cashing scams can wear many different disguises, including congratulating you on winning a prize or the lottery, paying you to be a secret shopper, or sending you more than necessary for an item you’re selling online. But there’s good news! They all have one dead giveaway that will let you know it’s a scam: a check from a stranger who asks you to send money back to them.
Protecting your finances is essential in an online world. Here are a few things you can do to keep yourself and your bank account safe:
- Think carefully — why would someone give you a check for more than necessary? This is a clear sign of fraud.
- Talk to a trusted friend, colleague, or your financial institution about the situation before acting on it.
- Wait until the check is valid to send any merchandise — even if that means waiting over two weeks.
- Never send money back to the person who sent you the funds.
- Utilize an online payment service if selling items virtually.
- Report any scams to the Federal Trade Commission.
Read “Check your sources: The dangers of fake cashier’s checks to learn more about check fraud.” Plus, check out our security page or for more on the latest scams and how APGFCU is working to keep you safe.