This is my first question on this site and may be a weird one. Thank you for being gentle and telling me if I'm off.

My question is simple, but I'm guessing that the answer probably isn't. Also, please keep in mind that I've never received or send money via a cheque in my life and that I haven't seen how one was being used for a long time, so my understanding of the system is sketchy at best.

My question stems from watching a video (My Adventure Working as a Check Scammer), portraying money fraud involving fake cheques. The victims cash the cheques and pass on part of the money, before the cheque bounces. They then have to pay back the full amount to the bank where they cashed the cheque. This happens within the US, i.e. the cheques are allegedly issued by and cashed at banks in the US.

Now here's my question: Why don't the involved financial institutions implement procedures to prevent this scam from working?

Keep in mind, I have almost no understanding of how the system behind cheques works, so I've got no qualification to make a suggestion on what such procedures might be. Instead, I'm thinking to myself that the involved parties all handle a lot of money, make large profits and employ many lawyers and lobbyists, surely some participating institution would have both the motivation and resources to make this happen. Where am I wrong with this line of thinking?

  • In many cases, banks (or the credit union I use) do wait for the check to clear before the funds are available. This is generally with largish checks - say $10K or more - where there might be a significant loss if it was a bad check. But generally the scammers use smaller checks. The money they get probably comes from what's already in the mark's account, rather than money the bank credited to the account because of the check. So the mark is the first loser here, and perhaps the only one - I don't know legal details.
    – jamesqf
    Jan 7, 2020 at 18:12

3 Answers 3


For your title question, there's this:

Under federal law, banks generally must make funds available to you from U.S. Treasury checks, most other governmental checks, and official bank checks (cashier’s checks, certified checks, and teller’s checks), a business day after you deposit the check.


That law appears to be Expedited Funds Availability Act. Since the banks are required to provide the funds relatively quickly, they often don't have time to fully vet the checks before cashing them. So a law that presumably was intended to make things easier for people has been hijacked to run scams. It does seem to me, however, that banks could be more transparent about the funds being provisional.

As for your question about why no one is doing anything about it, the banks are generally able to push the cost onto the victims, and the victims don't generally have much power, and there's probably an element of victim-blaming going on.

  • Also there is assumption, from bank and lawmakers side, that if you need cash fast you use different money trasnfer methods than check. If you use check, they assume, you have enough time to make sure it's legit. Jan 7, 2020 at 8:55
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    banks are generally able to push the cost onto the victims that's a bit of an over-simplification. Banks are highly motivated to stop check fraud, and carry considerable expenses related to check fraud (in terms of losses that they can't recover, insurance premiums, and maintaining entire departments of people and sophisticated software systems designed to stop check fraud). Checks are, by a large margin, the most costly and most risky transaction from a bank's perspective.
    – dwizum
    Jan 7, 2020 at 15:14
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    @Steve-O Insurance also cost money in relation to the risks covered. Mitigating a risk will lower the insurance premiums. Jan 7, 2020 at 15:28
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    I'm not sure if there is a requirement, but banks can put limits on how they accept checks. For example, my bank will only cash a check if I have the same amount of money in an existing account, making it easier to retrieve the money if the check ultimately bounces. Deposits work a little differently. Usually, the bank will "release" a fixed amount (a few hundred dollars) immediately to your account, with the rest coming after the check clears.
    – chepner
    Jan 7, 2020 at 15:36
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    @Feuermurmel - banks aren't required to cash checks (no matter what). Banks are allowed to refuse checks, essentially at their discretion, for reasons that are vague enough that they are hard to argue. That said, banks are in a constant fight for market share and often default in the customer's favor - if a specific bank stopped doing something that customers wanted it to do, they would lose business.
    – dwizum
    Jan 7, 2020 at 15:44

Checks are inherently different from other transactions because they are a transaction carried out via a physical instrument - the actual, paper check. This may seem like a trivial factor (after all, can't you just scan the relevant info from the check and turn it in to an instant electronic transaction?) but as with many things in life, the devil is in the details.

Besides being physical, some of the elements of a check transaction are manually created by a person writing on a piece of paper. That adds an additional level of complexity, because it makes it really hard to ensure the structure and content of certain information that has a direct impact on the result of the transaction (for example: regardless of what rules say, some banks will handle a check made out to "Mr. and Mrs Smith" differently than one made out to "Mr. or Mrs. Smith").

Finally, check processing is complicated because checks can be created (written) completely offline from the banking system. People carry books of paper around in their pockets, and they can create a transaction on a whim by writing on one of those pieces of paper and handing it to someone! That's pretty hard to handle from a technology perspective, because the bank holding the checking account has no way of knowing that a check has been written. In fact, the bank has no way of knowing if a customer even has a check book, since you can go to a third party, give them your checking account info, and get a book of checks printed without involving your bank!

Finally, since a check can be issued by, and processed by, any financial institution in the country, there has to be a middle man to negotiate the flow of traffic - it wouldn't be reasonable for every bank to have a connection with every other bank and to negotiate the process directly each time a check showed up.

So, while an everything-goes-perfectly check could certainly be fulfilled via some sort of instant electronic transaction at the point in time in which it is cashed or deposited, the "system" for processing checks has to be designed for all the weird edge cases that the above factors can create. This effectively means that there will be at least some degree of delay involved, since the bank trying to process the check will need to rely on other institutions to validate information on the check, and that information may have to be validated manually, and perhaps even sit in a queue for multiple types of validation. The dream of an instant system dies pretty quickly!

But can't we change the system and make it better?

Yes - of course. And, if you look at the last several decades, there have been a steady stream of changes to make the system better for customers:

  • Banks are now able to submit digital images of checks through the processing network, instead of actually sending the physical check to the issuing bank.
  • Banks are required to turn around checks within certain time frames, depending on the issuer and a number of other factors.
  • Banks are required to make a portion of the funds available within a certain time frame, as a way to allow (provisional) access to funds for customers. This can cut both ways, as indicated by your scam example - essentially, this places some degree of responsibility for determining trustworthiness of checks on the customer.

But why can't we just make a sweeping change and restart with a fresh system that's designed well from the ground up?

Mostly because customers who like checks like checks the way they are. If you change any of the fundamental characteristics of a check, it's no longer a check! Ultimately, that's the biggest factor stopping major changes in the way checks are handled. Banks are motivated to improve the system or at least reduce check usage, as check fraud is expensive (a high volume of money lost to scammers isn't recoverable, even if another party - such as the customer - is technically "at fault." But if customers want checks to stay the same, it's hard to force changes.

So where does that leave us?

Luckily, checks aren't the only instrument for people to make financial transactions. And, their usage has dropped considerably in the US in recent years - depending on how you count transactions (and what types of transactions you include), checks make up a single-digit percentage of transaction volume in recent years. This is good news, as the losses due to fraud will drop naturally as the overall volume goes down.

Effectively, what's happened is that totally new transactional vehicles have eaten into the market share of checks. These days, consumers have a dizzying array of choices in terms of how to move their money, and many of those choices overlap directly with transactions that checks used to monopolize. Someone who wants to pay rent to their landlord can certainly hand them a check each month, but they can also do a direct transfer from their bank's online banking portal, or use Zelle, or Paypal, or Venmo, or get a chashier's check, and so on.

So, in a very indirect way, the answer to "can't we just design a new system from the ground up to replace checks?" is yes - and that's exactly what is happening. But, because of consumer demand, the "old" check system has been left intact - and consumers are now able to choose which type of transaction they use for any specific purpose. In the great American tradition, the end result is that people are being given the freedom to do what they want (but, that freedom sometimes comes with consequences in terms of cost, risk, and timing.)

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    I believe here it is blatantly obvious that all my remarks are based solely on an outside view of the whole system. To me, it felt like cheques still played a major part in how people transfer money, coming from stories about government tax paybacks, rents, salaries being paid by cheques. I think phasing out cheques here just happened faster, probably because the government required banks to cover some of the costs of fraud, the banks passing on the cost to the customer via fees and the customers ultimately not bothering with cheques anymore. Jan 7, 2020 at 20:34
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    @Feuermurmel - Checks play a major role for some people. Generally it really boils down to preference. Some customers write hundreds of checks a month, others go years without writing or depositing a single check. Many of the functions you've mentioned (government tax returns, rent payments, salaries) can often be performed electronically, if both parties agree - and checks are a fallback if either party can't or doesn't want to do the transaction electronically.
    – dwizum
    Jan 7, 2020 at 20:38
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    About the middle man to negotiate the flow of traffic; I think part of this role is filled by SWIFT here in Europe. Of course mainly used for direct bank transfers these days. Thanks for the great and detailed response btw.! Jan 7, 2020 at 20:39
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    Also, I think you asked a great question, and hopefully the answers are helpful for people who wonder how checks work or why they still exist.
    – dwizum
    Jan 7, 2020 at 20:39

Because their customers want and need the money right away. They are not willing to wait several days.
Also, why would the banks care? It's not their money, they don't get scammed.

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    For those interested, the system used in Switzerland is called Auszahlungsschein (ASR). For the receiver, it works pretty much like a cheque: You bring the ASR to the next post office, they scan it into the computer and give you the money in cash. But instead of relying on the information on the ASR, all issued ASRs are registered in some database, including the amount and name of the receiver, so cashing a fake ASR just won't work. Jan 7, 2020 at 11:18
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    The ASR equivalent in the US is a postal money order. Personal checks work very differently.
    – dwizum
    Jan 7, 2020 at 15:09
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    I didn't know USPS Money Orders existed. From what I gathered by quickly researching them, they indeed seem to work very similarly. Jan 7, 2020 at 15:36
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    @Feuermurmel: One problem in translating the Swiss system (and I have lived in Switzerland) is that there are lots of places in the US where going to the post office is a significant trip.
    – jamesqf
    Jan 7, 2020 at 18:05
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    I don't know whether that's still a relevant use case... it is, and it's a primary reason why some consumers prefer checks - they are "offline" and don't require technology, which some people find intrusive, risky, hard to use, etc. For better or worse, some people are just really addicted to the idea of being able to create a transaction by writing on a piece of paper. That fundamentally prevents any sort of widespread, foolproof instantaneous verification mechanism, since such mechanisms are based on the ability to verify the account holder in realtime, which you can't do on paper.
    – dwizum
    Jan 7, 2020 at 20:44

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