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It’s no secret, fraud is on the rise. Unfortunately, fraud has become so common, it is getting to the point where it is not news anymore. And, we know the truth of the old adage, Out of sight, out of mind. If we go by that truth, taking fraud reminders off the front page of the paper may make it easier for crooks to take cash out of your bank.

Out point here is to remind you of some things that are out there to scam you out of your hard-earned money. This is by no means an exhaustive list, so please be diligent. If you run across a new one that is not on this list, please contact us, or leave a comment so we can include it.

Nigerian Email / Phone Scam

Enough has been written on this. Just Google Nigerian Phone Scam and you’ll have enough to read… well, until you get bored reading it. Let’s just suffice it to say that there are no princes in Nigeria or any other country willing to leave you – a totally anonymous person (or even a long, long-lost relative) any amount of money.

Very simply, this scam plays on your greed. Money is earned through hard work, not through answering random emails. Don’t fall for it.

Any time you have to pay money to receive money, beware – it’s probably a scam.

Craigslist Shipping Scam

If you’ve ever sold anything on Craigslist (or a similar site) – especially anything with a price tag over $100 – odds are good you’ve received a response like this:

Response: Very interested in your item. Is it still for sale.

You: Yes. I still have it. Price is $325.

Response: What is your address? I will send a check for $4,500. Please pay my driver $3,500 for picking it up and delivering to me. The rest of the money is yours for the trouble.

Sound familiar? I’ve received several of these over the past few years of selling on Craigslist. I have never fallen for the scam, but I know people who have. Just so it doesn’t happen to you, here’s how it works:

The scammer, posing as just another person responding to your ad, is attempting to make you an offer you cannot refuse. Since many people who are posting items on CL and other such sites are doing so to make some much needed money, the odds are good that someone will eventually take the bait. In the case above, the scammer (Response) is offering to pay you $1,000 for an item you have listed for $325. That’s an offer that many of us would have a tough time passing up. But, as Momma always said, If something sounds too good to be true, it probably is.  As much as we hate to admit it, Momma’s right again.

Let’s say you take the bait.

Scammer gets your address and either mails a check to you or sends a “driver” out to you with a check. You take the check to your bank and cash it, keeping the $1,000 you were promised and give the “driver” your item and $3,500 in cash. Driver takes off, never to be seen again. Within a few days, your bank calls and you learn a new vocabulary word: chargeback.

Instead of your banker teaching you this word, please allow me to explain the concept of a chargeback. A chargeback is what bankers call an item that was deposited, but sent back by the bank it was supposedly drawn on. So, any credit that you had received in your account for that item (or any credit you received using your account as recourse) gets charged back to your account.

Here is what the chargeback might look like in the above scenario:

Wednesday 17 August 2016

Your account balance (before the check): $50

You bring the $4,500 check to the bank and cash it. Whether or not you realize it, the bank – if it allows you to cash the check at all – will make note of your bank account as “recourse”, that is, if something goes wrong with the check, they know where to go to get the money back.

Your account balance (after the check): $50 (i.e. you took all of it in cash)

Monday 22 August 2016

Chargeback: $4,500 check (no such account)

Your account balance: – $4,450 as in, you owe the bank $4,450.

You see, what happened was the check was either not real or it was stolen. So, when your bank tried to run it through the bank it was supposedly drawn upon, there was no such account there. Or, maybe there was a stop payment on that check because it had been reported stolen.

This happens more often than most people realize.

Check Cashing Scam

This, too, happens frequently – and much of the time it happens innocently.

Imagine this:

You are a hardworking person who manages your finances well. You have accounts at the local bank or credit union where your employer directly deposits your paycheck each payday. You probably even use the bank’s bill pay service to make sure all your payments are made on time.

You’ve sold some stuff online, and passed up the offers for someone to send you a check that you’ll cash and pay some driver. No way! It’s cash up front at an in-person meeting in a well-lit public place for you. You’re too smart for those scams.

It’s Friday, you’re off work after a hard week and looking forward to happy hour with your friends to get the weekend started right. On your way to the watering hole, you get a text from one of your friends, and he/she has a friend (that you may or may not know) who needs to cash a check so s/he can have some cash for happy hour. This friend-of-a-friend doesn’t have a bank account, and your mutual friend banks out of town. Can this person just sign the check over to you and you deposit it in your account and give him/her cash?

How does that sound to you? The check is for a couple hundred bucks. Not unreasonable. Your good friend knows this person and would gladly do this for him/her if the bank was closer. No big deal. Right?

Maybe. Maybe not.

Unfortunately, I’ve seen friendships end over situations just like this. Here’s how:

Let’s say your good friend, Chris is the one who sent you the text. Chris’s friend Jesse is in from out of town and is the one with the check. You don’t really know Jesse, but you don’t think it’s a big deal so you do it. You meet up with Chris and Jesse at your bank where Jesse signs the back of the check and makes it payable to you. (This is called a third-party check.) You sign the $200 check and hand it to the teller to cash. The teller looks and sees that you have $350 in your account (it’s payday, after all) so she hands you $200. You give the $200 to Jesse and don’t give it a second thought… Until your debit card doesn’t work when you go to pay for lunch on Wednesday.

What you didn’t know was that $200 check from Jesse’s uncle wasn’t from Jesse’s uncle. Jesse swiped some checks and forged his uncle’s signature and the bank caught the forgery and sent it back to your bank unpaid. All your bank can tell you is the check was sent back unpaid. If you want your 200 bucks, it’s up to you to track Jesse down.

Or maybe, it was Jesse’s paycheck and his boss fell on hard times and the bank sent the check back NSF (non-sufficient funds), meaning that the boss didn’t have enough in his account to cover the check. Now, you’ve got to track down the boss to get payment.

Either way, you’ve got a chargeback on your account – which makes you look bad to your bank, and probably costs you in bank fees. You are out $200. Worst of all, it’s your fault.

As you can see, this can happen not only as a scam, but as an innocent transaction. Jesse didn’t know his boss didn’t have enough money to pay him, but he spent the $200 over the weekend and doesn’t feel like he owes you anything – after all, it wasn’t his fault.

Check Washing Scam

If you’re of the old school and you still write out checks by hand and put them in the mailbox in front of your house with the flag up, STOP IT! NOW!!

Seriously. Stop it. Now!

For decades, we have paid our bills with checks – and if you think about it, it is the STUPIDEST thing we could be doing.

Let’s reflect for a moment on what a check is. A check is a small slip of paper with your address, your bank, your bank’s routing number and YOUR CHECKING ACCOUNT NUMBER printed clearly on it for all to see. I remember when I was growing up (back in the dark ages of the 1980’s) some people would even have their social security and driver’s license numbers printed on them as well. Oh, yeah, and when you’re ready to pay someone with a check, you authorize payment from your bank account with your signature.

Heck, while we’re at it, why not include little copies of our birth certificates and passports too!

This is where check washing comes into play.

Crooks look for your mailbox flag to be up – assuming you’re paying a bill with a check. They then, take your check, and using cheap and easy-to-get chemicals wash off everything you’ve written on it – except for your signature. At this point, they literally have a blank check – with your signature – and they can write it for any amount they want. They can clean out your bank account, and the only way to re-secure your account is to close the old one and open a new one with a new account number.

One way to combat this is by using your bank’s online billpay feature. With this, the payment goes directly from your bank to the payee. Depending on your bank, the payments may be made electronically (without checks) or the checks may have different routing or account numbers on them to increase your security.

If you absolutely must write out your own checks, please place them in a USPS mail receptacle that is secure – like the ones found at or in front of Post Offices or on the streets of most major cities.

Conclusion

The overarching theme here is that scammers are after your money. Don’t make it easy for them. Guard your personal information very closely. Don’t forget that a checking account is a privilege that your bank allows you. They have a lot at risk, too, and if they think you are being too risky, they can ban you from having a checking account.