When the Federal Trade Commission, American Bankers Association, and the United States Postal Service Inspection Office warn about fake check scams, we should all pay attention. Each group has posted articles and videos outlining how these check scams work and how best to avoid them. Here’s a roundup of what these experts share. One thing they all agree on: Do not ever cash a check from someone you don’t know or a group you don’t usually do business with.
When college student Brady McDonald looked to sublet his apartment, he placed an ad on Craigslist. An overseas “tenant” sent him a check deposit for three thousand dollars to cover the rent and then some. The extra funds, the tenant said, were to be mailed back to a “travel agent” in the person’s supposed home country to pay their way into the United States.
“It seemed odd, but I cashed the check and mailed them the ‘extra’ money,” McDonald told the United States Postal Service (USPS) Inspection Office. The check looked legit enough to fool him, his father, and the bank, he explained.
In time, the bank learned the check wasn’t tied to a real account with actual funds. By then, the scammer had made off with the money McDonald had mailed them. McDonald had to pay the bank back the money the scammers made off with and the rest of the initial three thousand dollars.
The American Bankers Association (ABA) says it’s getting harder and harder to spot counterfeit checks, cashier’s checks, and money orders. Thanks to advanced printing options, even the phoniest of checks can dupe banks and consumers alike.
How fake check scams work
Banks tend to approve checks before the issuing account guarantees them. In other words, you can cash a check and walk off with the funds, yet still have a financial institution contact you for a bounced check because there were no funds in the issuer’s account.
When you reach out to the issuer, if it’s a scam, they are long gone. And you’re on the hook for the funds the bank doled out.
“There’s a misconception that a bank will assume the losses in situations like this, when in reality you as a consumer are responsible for funds you deposit into your account and that you withdraw from your account,” says Gary Neff of the USPS Inspection Service.
The different kinds of check scams
According to the American Bank Association (ABA), there are several ways the scams play out. Most fall in the “pay-to-play” category—the victims must pay out money to get paid themselves. Besides the tenant scam, here are some other ways pay-to-play may pan out.
Scammers might hire you as a personal assistant, ask you to deposit a check, and then wire or transfer money to their accounts. You keep your portion (your salary), they get the rest. By the time the bank contacts you about the fraud, your “boss” has vanished.
In another scenario, you might get hired as a “secret shopper.” In this scheme, your new boss sends you a check to deposit into your account. They then ask you to buy a list of things and ship those to them. By the time their check gets discovered as a fake, the scammer has vanished with the goods.
The Federal Trade Commission (FTC) reports people also get counterfeit checks affiliated with car wrap scams, sweepstakes, or “free money” offers.
How to avoid check scams
The FTC, ABA, and the USPS Inspection Office all agree on how to avoid falling victim to check scams:
Only cash checks from people and institutions you know.
Never cash a check and route the money back to the account holder in the form of gift cards, wire transfers, or crypto. Anyone asking you to do so is a scammer.
Don’t cash “free” checks sent to you in the mail, no matter how legitimate they appear to be.
Watch out for at-home jobs that require you to route money.
What to do if you encounter a fake check scam
Scammers count on urgency, confusion, and misplaced trust to trick people into cashing fake checks. Always remember: If something feels off, it probably is. Don’t deposit checks you think are fakes. Turn them into your bank and report the suspected fraud.
Otherwise, take a photo of the check and share that in a report to the FTC and the Better Business Bureau’s Scam Tracker. If you received it in regular mail, also report the scam to the USPS Inspection Office.
If you're an Allstate Identity Protection member, we're here to help. If you ever encounter a suspicious check, questionable offer, or potential scam, reach out to us. We can help you navigate next steps, offer advice on reporting fraud, and support you in protecting your identity and financial wellbeing.