5

I think that checks are quite unsafe, every time I write a check I'm putting my entire banking information in the hands of a stranger.

Let me give an example, I wrote a check to my cover my sister's rent and mailed it to her. Somehow USPS managed to lose that mail and it never got to her. I was now out of checks and she was very worried. I searched online and it seems that it's ok for someone to print their own checks and they don't need to be issued from a bank. I did just that found a template online, made the appropriate changes with Photoshop. Printed the checked, signed, scanned and sent it to her over email. She then printed it out and used her mobile app to deposit the check. Next day the check cleared and she had her money.

While this is all wonderfully convenient, I'm alarmed by the fact that it's so easy for someone to get money out from my account.

If somebody has a check that I wrote, that check has all the information with my account details, the bank routing number etc to forge checks and then deposit them into their accounts. What makes it worse is that my Savings Account is linked with my checking account for overdraft protection. So essentially any scamster could clean out my account and there is precious little that I could do about it.

This worries me greatly, do people have strategies to minimize the blast radius for such scenarios? Does it make sense to maintain accounts with different banks and use only one account to make payments? Alternatively is there an option to disable checks for a checking account, even then I'd be exposed in all the places where I pay my bills online and ACH is free wherereas there is a charge for Credit and Debit Cards.

With credit cards etc, there is 100% fraud protection and 0 liability. With a checking account there is none of this

9

You are correct that it is relatively easy for someone to create fake checks and steal money. They even made a movie about it, and not much has changed since that movie takes place. However, most checking accounts do indeed have $0 liability for this type of check fraud, referred to as check forgery.

If someone does cash a check against your account that you did not write, you will eventually get your money back. Essentially, the thief stole from the bank (or the merchant that accepted the check), not from you.

In the U.S., check forgery is generally covered by state law. According to a Q&A on the CFPB website, if you report to the bank that a check that cleared your account was forged in some way, and you do this within a reporting window defined by state law, the bank is supposed to return your money.

  • It's comforting to know that I'll have a zero fraud liability for this. Is this guaranteed by law or does this depend on the terms that I agreed to with the bank. – nikhil Aug 12 '15 at 13:48
  • @nikhil It's usually covered by state law in the U.S. I've updated the answer with a little more information. – Ben Miller - Reinstate Monica Aug 13 '15 at 20:33
4

Read the check: it says "Pay to the order of ...". It's simply an order from you to your bank to give money to someone. It can be written on anything. Back in the olden days (a hundred years or so ago) it would have simply been a letter to the bank. Those rules haven't changed much with today's automation. What matters is that the order comes from you, which means it must have your signature. If the bank pays a check with a fraudulent signature they're responsible. Granted, banks don't look very carefully at checks any more (I once accidentally swapped two checks when I paid bills, and the phone company simply gave me a $700 credit on my $50-a-month account), but if they screw up it's their problem.

  • @keshlam - that's a different issue. A non-standard check can't go through the standard processing system, so you can't present it to a bank that it isn't drawn on. – Pete Becker Aug 12 '15 at 14:05

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