Check fraud can refer to several types of fraudulent acts, including writing bad checks, stealing and altering checks, or forging checks. To protect yourself, if you write checks, you need to carefully monitor your checking account; if someone tries to send you a check, please also be alert to check fraud.

How does check fraud happen?

How check fraud works varies by type of fraud. In some cases, fraud refers to someone knowingly writing a bad check – a check for an amount exceeding their account balance. Other types of check fraud are more sophisticated, involving criminals forging or altering checks to steal funds.

Types of check fraud

There are several types of check fraud:

Paper hanging: This means intentionally writing a bad check, taking advantage of the fact that it takes time for a check to clear – the so-called "float time." The person writing the check may receive products or services paid for with the check, and the payee doesn't realize the check will bounce until it's too late.

Check kiting: Check kiting takes various forms, but all involve writing bad checks and using multiple accounts. In some cases, a criminal might write a bad check from Bank A, then write a bad check from Bank B and deposit it into Bank A, temporarily covering the amount. This check kiting behavior may continue until the criminal has enough cash to cover the amount. Alternatively, the criminal might write multiple bad checks, deposit them into an account or use them for credit card payments, and then "bust out," withdrawing cash or using credit cards.

Check washing: Criminals may steal checks from USPS mailboxes, mail carriers, or your mailbox, then wash the checks with chemicals, preserving the signature and erasing the amount and payee (i.e., the recipient of the check). They will then fill in a new amount and send the check to themselves, an accomplice, or a fake identity they have created, depositing the check into an account they control.

Check counterfeiting: Check counterfeiting is similar to check washing, except that criminals scan the check and use software to alter it, then print a counterfeit check. Criminals may use this technique to bypass some security measures that prevent check washing.

Check theft and forgery: Criminals may steal or print blank checks, then forge signatures, rather than altering stolen checks.

How to avoid check fraud

First, don't knowingly write bad checks – it's illegal and can result in heavy fines and jail time. Even if you accidentally write a bad check, you may have to pay additional fees when the check bounces.

There are also companies that keep records of consumers' check writing, checking account, and savings account history, similar to how Experian keeps records of your credit history. If your check bounces or your account balance goes negative, you may have difficulty opening a checking account.

In addition to monitoring your own check writing activity, you need to guard against scams. Read on to learn how to protect yourself.

Protecting yourself from check washing and counterfeiting

To prevent others from stealing and using checks you've written, you can:

Use different payment methods. Consider using credit cards, debit cards, or peer-to-peer payment apps instead of mailing checks. Many banks and credit unions also offer free online bill payment services that you can use to pay bills.

Write checks with black gel pens. If you use certain types of pens, it may be difficult for fraudsters to wash the ink off the check. For example, Uni-Ball claims its "Super Ink" pens protect you from check fraud.

Don't mail checks from home. If you're mailing a check, try to drop it off directly at the post office. Alternatively, drop it in a mailbox that will be checked before the end of the day.

Check your mail daily. Try to check your mail regularly to ensure no one is stealing checks or other mail from your mailbox. You can use the free USPS Informed Delivery service to receive emails with images of your day's mail.

Hold your mail while away. If you'll be away for up to 30 days, you can also request mail hold service from the USPS.

If you're writing checks, you may also need to regularly monitor your account for unusual transactions.

Protecting yourself from fraudulent checks

You also need to be wary of people trying to pay you with fraudulent checks. This can be a common tactic in certain types of scams, such as overpayment scams and employment scams.

The specifics may vary from scammer to scammer. You might be trying to buy electronics, a puppy, or a car from an online marketplace. Or, you might see a job posting and even go through several rounds of interviews. But you'll know it's a scam when the scammer or company sends you a check for more than the expected amount.

They may claim they accidentally overpaid you and ask you to deposit the check and refund the overpayment. However, even if the check appears to have cleared and the money has actually arrived, it is almost certainly a fraudulent check. Days or weeks later, your bank may notify you that the check bounced. By then, the other party will have already absconded with your money.

What to do if you are a victim of check fraud

Your next steps will depend on the type of check fraud.

If someone stole, washed, or forged one of your checks: Contact your bank and file a police report. Fortunately, your bank will likely reimburse you for your loss. However, this can take weeks or even months. If you have difficulty getting reimbursed, you can look up your bank's regulator on HelpWithMyBank.gov and file a complaint.

If you deposited a fraudulent check and then sent money to someone else: Scammers make a living deceiving people, and some are very good at it. You can try to report the fraud to the institution you sent money through and see if the transaction can be reversed. But if you sent cash, gift cards, cryptocurrency, or a wire transfer to the scammer, or if you sent money via other methods more than a few days ago, you may not be able to get your money back.

You can also report any check fraud to help agencies track down fraud rings and protect others. The Federal Trade Commission operates ReportFraud.ftc.gov, and the FBI has the Internet Crime Complaint Center (IC3).

Monitor your credit and identity

Check fraud does not necessarily affect your credit. But criminals who steal checks from your mail or scam you into sending money may also collect other personal information and try to steal your identity. Use credit monitoring tools (Experian offers free credit monitoring) to be notified when someone applies for credit in your name. Additionally, there are identity protection plans, such as Experian Premium membership, that monitor other databases and help you restore your identity.