Cashier’s checks have a reputation for being secure. They are drawn on the issuing bank, not on a personal account, so the bank guarantees payment and they will not bounce. Some scammers exploit this reputation by using forged cashier’s checks. Modern printing technology allows forgers to make checks so convincing that even bank tellers may have trouble identifying them. You can protect yourself by remaining vigilant and knowing the ways that scammers use cashier’s checks.
What is a Cashier’s Check?
A cashier’s check is written by a bank or credit union against its own funds. If you request a cashiers’ check the bank will move money from your account into their own account and issue the check to the payee of your choice. You’ll pay a fee to have a cashier’s check issued.
Because a legitimate cashier’s check cannot bounce, they are usually treated as a safe way to make or receive large payments. They are often used for making a down payment on a home, paying closing costs or buying cars, land or other major purchases. Cashier’s checks usually have watermarks and multiple signatures to make them difficult to counterfeit.
How Scammers Use Cashier’s Checks
Like most check-based scams, cashier’s check scams usually take advantage of the check’s clearing time. Banks are required to make funds available to check depositors quickly, and there may be several days or longer between the release of the funds and the issuing bank’s confirmation that the check is valid. Scammers have developed several ways to exploit this gap:
- Pay and run. The simplest form of cashier’s check fraud targets individuals who are selling something, often in an online marketplace. The “buyer” pays with a forged cashier’s check, you ship the product and by the time the check is tagged as fake, the “buyer” is long gone.
- Overpayment scams also target sellers of goods or services. The “buyer” pays with a check that is made out for a sum greater than the sale price. They then ask the shipper to send back the overpayment or send it to a “shipper”. You ship the product and send the money, and you end up losing both.
- Mystery Shopper or Virtual Assistant scams target people looking for work-from-home opportunities. Many people in this market are desperate to establish an employment history and may set aside their skepticism in their eagerness to find a job.
The “employer” sends a cashier’s check and asks the worker to deposit it to their own account. The worker is then asked to make payments to “customers” or to use the money to test money transfer services as a mystery shopper. When the check turns out to be bad the eager worker is liable for the payments.
- Prize-claiming scams start with you receiving a cashier’s check in the mail as a prize for a lottery you won without entering, as an inheritance or some other cover story. You can deposit the check, but you’re expected to send a portion of the money on as payment for taxes, processing fees or some other excuse. The check is fake and you’re on the hook for the payment you made.
All of these scams are easy to avoid, but people fall for them on a regular basis and lose significant sums of money as a result.
How to Avoid Cashier’s Check Scams
These simple steps will help you protects yourself from scams based on cashier’s checks:
- Don’t accept checks. With the rising prevalence of online payment systems, almost nobody really needs to pay with a cashier’s check. If someone insists on this mode of payment, it’s reasonable to be suspicious.
- Call the issuing bank. The bank’s name should be on the check. If there’s a number on the check, don’t use it. Look the bank up, call them and ask them to verify that the check is genuine.
- Accompany the person paying to the bank. If you’re dealing with someone in your area, go to the bank with them when they request the cashier’s check. Watch closely to make sure nothing gets switched.
- Never accept a cashier’s check with a blank space for the payee’s name. A cashier’s check is always issued to a specific payee. If the space is blank something’s wrong.
- Never accept a check for more than the amount you’re owed. This is virtually always a red flag indicating that a scam is in play.
- Never use your personal bank account for any business purpose. If you’re working online and an employer asks you to handle money, refuse. Never use your personal bank account to move money on someone else’s behalf, unless you know them well and trust them.
- Examine the check closely. Look for poor quality paper, spelling errors or other suspicious signs.
- Watch out for suspicious communications. If you’re discussing a purchase and the buyer seems eager to conclude the transaction with little or no interest in the item, be wary. Review all communications closely. Look for anything that seems suspicious or out of place.
- Discuss your suspicions with your bank. If you have doubts about a check you’re depositing, show it to your bank manager and get advice on how to handle the situation.
- Understand the difference between clearing and funds availability. Banks are required to make funds available soon after you deposit a check. Clearing, which refers to the time the bank actually receives the money from the paying bank, takes longer. If you have doubts about a check, make sure the funds have actually cleared before you use them.
Scammers look for easy targets, and many people let their guard down because cashier’s checks have a reputation as a highly secure form of payment. Staying skeptical and protecting yourself is the best protection.
What to Do if You’re A Victim
People who are victimized by cashier’s check fraud are often embarrassed at having fallen for it: the signs are always clear in retrospect. Many victims don’t report the fraud, and that’s what scammers count on. Always report fraud if you’re a victim. There are a number of reports that can help you:
- The Issuing Bank and the Bank Where You Deposited the Check.
- If the Deal Started Online, Report the Fraud to the Website Operator.
- Local Police, if the Fraud Was Local.
In many states, banks are required to reimburse victims of forgery. Reporting fraud promptly can help you get money back, can help prevent scammers from victimizing others and may lead to the apprehension of the scammer.
Cashier’s checks are becoming less common as more payments move to online systems. That makes cashier’s check fraud less common, but it also means many people are less aware of this type of fraud. Understanding that these frauds do occur and knowing the techniques that fraud artists use to exploit cashier’s checks will help you protect yourself.