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Avoiding Cashier’s Check Fraud

Banking, Banking Basics

If you’ve made a big purchase such as a house or a car recently, it’s possible you were asked to bring a cashier’s check to the table.

Many people think cashier’s checks are super secure — safer than electronic payments, safer than personal checks, and yes, some people even think they’re safer than cash.

The check is created by a bank after it has obtained funds from the person who buys it. When you cash the check, the funds are payable by the bank, rather than the individual. Sometimes they’re called official checks, or bank checks.

But cashier’s checks are not immune to fraud. Initially, security features made these checks hard to forge, but nowadays almost anything can be faked.

“There are fraudulent cashier’s checks out there, and just because it’s a cashier’s check doesn’t absolve the consumer” of the responsibility to make sure it’s legitimate, says Cary Whaley, vice president of payments and technology policy for the Independent Community Bankers of America.

But you can avoid falling prey to a phony cashier’s check.

When does fraud occur?

Cashier’s check fraud isn’t a rampant problem. The use of all kinds of checks has declined as online payments have become more secure and accessible to more people.

But Whaley says some common scams still use fraudulent bank checks to swindle people out of goods or money:

The scam: You’ve got money!

Victims are told that they’ve somehow won the lottery in a country they’ve never visited, or have received a surprise inheritance.

This scam can be used to trick in you into divulging personal information like bank account numbers, or into paying back a small portion of the money you have theoretically received in the form of a phony bank or cashier’s check. The payment to you, of course, doesn’t go through.

How to avoid it: “As much as you believe in the kindness of strangers, you really need to apply the smell test to that,” Whaley says. As the old adage goes, if something sounds too good to be true, it probably is.

The scam: Mystery shopper

This common bit of trickery often appeals to vulnerable people who are looking for work, especially work-from-home jobs. Often, you are given a bank check for an initial payment and asked to send back part of the money to activate your account. Once you send the money, you discover that their payment was bogus.

How to avoid it: Research any companies offering work on the Better Business Bureau website. The Federal Trade Commission also recommends that you don’t wire money or agree to cash a check for a stranger.

The scam: Craigslist payments

This one is more common than the others, Whaley says. In this scam, you’re selling an item on Craigslist or a similar online site. The buyer pays with a cashier’s check, takes your item and is long gone before you realize the check isn’t good.

How to avoid it: This one is relatively simple: Don’t take a bank check from someone you don’t know. If you must, ask the buyer to go with you to the bank that issued the check. A teller should be able to say if the check is good and the funds are available.

Signs of fraud

Your best defense is to be cautious about accepting a cashier’s check in the first place. But if you have received a check and want to know whether it’s good, Whaley says “the eye test” can tell you a lot. If it’s black and white or looks like it’s been photocopied or printed on a cheap color printer, it’s fraudulent.

If a cashier’s check has a blank space for the payee, don’t accept it. These instruments have to be made out to a specific person or organization when they’re issued, so the payee can’t be filled in later.

How to protect yourself

Prevention is the best strategy. If you’re suspicious, call the issuing bank to verify that the check is genuine — but don’t call the number printed on the check. If the check itself is phony, that number probably is, too. Instead, look up the contact information for the bank online and use the phone number listed there.

If you must take a check, wait several days after you deposit it before trying to use the funds. Sometimes your bank will make the money available to you even before the check has cleared, so if you spend that money right away, you could be in trouble if the check bounces.

If you’re victimized

If it happens to you, report the crime immediately to the companies involved — the bank where you deposited the check, the one that supposedly issued the check, the operator of the site or service where you met the person who gave you the check — and the FTC. You should also call your state attorney general’s office and the U.S. Postal Service if you got the check through the mail.

Cashier’s check fraud is dangerous partly because it’s not an everyday occurrence; that means you may not be guarding against it. If you do decide to accept a check, make sure you’re smart about how you verify it.

Virginia C. McGuire is a staff writer covering personal finance for NerdWallet. Follow her on Twitter @vcmcguire and on Google+.