Check Fraud: Why Writing Checks can be Hazardous to Your Wealth

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in identity theft

Writing checks is one of those activities which, like driving, becomes so ordinary that we can’t see the potential hazards we face every time we do it.

But every time we use a check to make a payment there is a real potential that it can fall into the wrong hands exposing us to a one time loss of money or worse, the outright theft of our identity.

One example of what a thief could do with your check is a process called “check washing”. The check is soaked in a solution using bleach or other household chemicals causing the ink to wash off the check. The thief can remove all handwritten ink from the check and rewrite it as he pleases, or he could wash certain entries, like the amount, while preserving your signature for presentation.

Checks are a treasure trove of personal information

Another issue with checks is that we’re often unaware just how much information a typical check contains. It’s that information—more than the value of the check itself—that a thief might be interested in. With enough information, a thief can help himself to a lot more than the amount the check is written for.

Some of the information included on a typical check:

  1. Your name
  2. Your address
  3. Your phone number (often)
  4. Your bank routing number
  5. Your bank account number
  6. Your signature
  7. Personal information written on the “memo” line
  8. The account number of a bill or account being paid
  9. Depending on who you’re paying, sometimes a drivers license number or even your social security number

That’s a lot of information on a small slip of paper, and more than enough than a would-be thief would need to get a good start on stealing your identity. Even if he doesn’t attempt to go after your bank account, he has enough information to gain access to other areas of your financial life.

Checks are well traveled documents

Another potential problem is the fact that checks make their way through the financial and business communities offering access to any number of unintended parties.

Consider where a check typically goes:

  • In your mailbox and eventually to other peoples mailboxes
  • To the grocery store
  • To small business vendors ““ hair dressers, house cleaners, repairmen and other contractors
  • To utility companies
  • To creditors and insurance companies
  • To schools
  • To charities
  • With the internet, increasingly to foreign destinations

Think about all the information contained on your check that we listed above, then consider the number of checks you write in a typical month, all the places they go and all the hands they pass through. Every person who handles your check represents a potential identity thief!

What we can do to protect ourselves from Check Fraud

Considering the potential for what could happen, it’s close to a miracle that check fraud doesn’t happen more frequently than it does. It’s not possible to live a check free life, but there are steps we can take to protect ourselves from problems.

  1. Keep a supply of cash in the house and in your wallet so you can pay contractors and maintenance people in cash, rather than by check. The fewer checks put in circulation the better.
  2. Forego bank overdraft protection to limit the amount of money an altered check can be cashed for.
  3. Use a credit card or open a PayPal account for any online transactions. This is especially important for foreign transactions since the reach of local law enforcement stops at the border.
  4. Pay for groceries with either a debit or credit card.
  5. Mail your bill payments directly at the post office. Better yet, get a post office box for money related mail to eliminate the possibility of mail being stolen from your home mail box.
  6. Set up online bill payment for as many services as possible.
  7. Write your checks using gel pens, which are less likely to wash out of a check, or use checks specifically designed to show a “void” message when chemically altered.
  8. Greeting cards are special targets since they often contain money. Consider mailing them in a larger envelope, rather than in the obvious one that comes with the card.

A little bit of moderation in our use of checks can go a long way toward preventing what could be a complete disaster should a check fall into the wrong hands.

Can you think of other methods we can use to reduce or eliminate the chance that we fall victim to check fraud?

{ 2 trackbacks }

Friday Links | Finance Blog
2010/04/30 at 4:17 am
Wash Sales and Long-Term Care: Weekend Reading
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{ 10 comments… read them below or add one }

Advance Web 2010/04/27 at 4:19 am

Oh. Amazing article. This is great. a whole ebook about this one will be great.

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kevin 2010/04/27 at 6:09 am

Advance Web – let’s partner; when do you want to get started??? 😉

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Budgeting in the Fun Stuff 2010/04/27 at 7:27 am

I’d add, only write checks to people you trust.

My husband and I only use checks for our long-time housekeeper, lawn care guy, and fund raisers that friends and family are participating in. That means our checks go directly to the people we trust and into a bank. No post office and no other middle men. As soon as that check is deposited, our bank posts the transaction with the picture of the check so I know which ones have been turned in.

Every other bill we have is on our credit card or automatically debited from our checking account. We keep a close eye on our credit reports 3 times a year and check all our accounts weekly to put a stop to any fraudulent activity asap.

In general, I try to live cautiously but not in fear. That seems to be a good balance for us.

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kevin 2010/04/27 at 8:35 am

Good suggestions. We should never be passing checks out to charity solicitors at the front door, or the occasional contractor, not unless we can run a background check on them–and that won’t happen!

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kt 2010/04/27 at 9:36 am

this is the second scary post on loosing cash that i have read. The other one was about who easy it is for you to have your identity stolen. These damn thieves are becoming very smart aren’t they? why cant they use this obvious intelligence for something constructive instead of making other people’s lives difficult??

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kevin 2010/04/27 at 12:30 pm

kt – that’s an outstanding point! While we don’t like what the theives do, we do have to tip our hats at their ingenuity. If only they could channel that obvious talent into the mainstream economy, not only would they benefit, but so would our whole society.

But maybe it comes down to making a quick buck. To go straight would mean to enter the system with it’s attendant circuit breakers that make the quick buck nearly impossible to make. I think that might be why they don’t, but of course I’m speculating…

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Mike 2010/04/27 at 2:32 pm

I write as few checks as possible for this reason. Once years ago I got burned by information off of a check that someone at a store had written down. I uaully use a credit card, or cash for most transactions.

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Kevin 2010/04/28 at 4:31 am

What we often lose sight of is the fact that it all comes down to the honesty of the people on the receiving end of our checks. It really is a miracle that problems don’t occur more frequently–obviously more people are honest than we think. All of our precautions are aimed at the fraction of 1% of the population who might try to pull something.

I like what Budgeting in the Fun Stuff said in the first comment, “I try to live cautiously but not in fear”–when all is said and done that’s the best any of us can do.

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paul's wife 2010/05/05 at 10:24 pm

I am the treasurer of a local non-profit organization. At this point, checks are the only form of payment possible. We have double signer checks and our bank sends us images at the end of the month of every check cashed. I really can’t see any other way of conducting business. Any suggestions?

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Gerald 2016/06/08 at 12:55 pm

Thank you for a very helpful article. This just deserves to be recognized and get shared.

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