Cashier's Check Fraud

That "Safe" Payment can be Trouble

Cashier's check
Is it safe to assume that cashier's checks are safe?. Mike Kemp / Rubberball / Getty Images

Cashier’s checks are often considered safe, and that’s what makes them perfect for scams. Whether you’re selling something online or in-person, cashier’s checks deserve extra attention. Get familiar with the most common red flags, and you’ll greatly improve your chances of avoiding fraud.

Safety and Cashier’s Check Fraud

Why are cashier’s checks safe? When they’re legitimate, they offer guaranteed funds: you don’t have to worry about a personal check bouncing, and you’ll be able to use the money from the check within one business day (at least the first $5,000 should be available).

Unfortunately, cashier’s checks are much less safe than they used to be. If you don’t know and trust your buyer, you simply cannot assume that a cashier’s check is just as good as cash.

A Typical Cashier’s Check Scam

The most common cashier’s check scam goes something like this: a "buyer" wants to purchase a product and will use a cashier’s check. For whatever reason, the buyer has a check issued for an amount in excess of the purchase price. Then, the buyer wants the seller to "just go ahead" and deposit the check. Finally, the buyer requests that you return the excess money, typically in cash or by wire transfer or via Western Union (the funds either go directly back to the buyer or to a third party).

Note the key elements:

  1. A cashier’s check or money order is used (could they pay any other way?)
  2. You get more than you asked for
  3. You’re supposed to send money to somebody else

If you’re faced with a situation that looks anything like this, you’re almost certainly dealing with a thief.

Timing is important: don’t send any money until you find that the paying bank has actually paid the funds. This is often referred to as the time when the check “clears,” but that term can be confusing – even for bank employees. Funds from a cashier’s check will be available to you for withdrawal within one business day, but that doesn’t mean that the funds actually moved to your bank.

That process can take several business days or longer. The less you know about your buyer, the longer you should wait.

Rubber cashier’s checks: cashier’s check scams work because everybody believes that they’re safe – if the bank lets you take cash, the check must be good, right? Unfortunately, your bank makes the assumption that the check will be good, but the responsibility is ultimately yours. If you take money (to send it to a “shipper,” for example), you’ll have to replace that money. In some cases, victims lose hundreds or thousands of dollars. Once your bank finds out that the check was bogus, the deposit will be reversed – which could leave you with a negative account balance. With an empty bank account, you’ll end up bouncing checks and missing other important payments.

Protect Yourself

There are several things you can do to protect yourself:

  1. Never accept a check for more than you asked for
  2. If possible, go to the bank with whoever is paying you and watch them get the cashier's check from a teller (stand in line with them so there's no "switcharoo")
  3. Verify funds on any check or money order you receive, but keep in mind that this isn't a foolproof tactic (it'll just reveal some of the sloppier criminals)
  1. Insist on other forms of payment that you know are more reliable (such as a wire transfer) but be careful about giving out your bank account information
  2. Only deal with local buyers on Craigslist and similar sites, and insist on cash payments if you can’t go to the bank together
  3. Inspect any check you receive, looking for signs that it’s a fake (misspelled words or poor quality paper without any security features, for example)

Trust your gut and step away from the situation before you accept a cashier’s check. Sometimes you’ll notice odd clues that indicate trouble (for example, the person doesn’t seem to know much about the item you’re selling, but he’s eager to buy).

If you fall for a cashier’s check scam, go easy on yourself – unfortunately, con artists are very good at what they do. Take action to prevent further losses, and report the crime to the police.

Picking Cashier’s Check Fraud Apart

As with everything, you have to ask if the situation makes sense. Why would a person you’ve never met entrust you with thousands of dollars? If they can contact you, they can surely give adequate instructions to have the bank issue a cashier’s check correctly. If the excessive amount was in fact the buyer’s fault, wouldn’t the buyer pay the $3 (or whatever) fee to have an accurate check printed instead of giving you (a stranger) the opportunity to hold on to the extra cash?

Finally, if they can come up with the money, they can surely afford to pay an extra cashier’s check fee to write a separate check to their “agent” or “associate” who you're supposed to forward the money to.

More Examples

There are numerous ways to use cashier’s checks in scams. Keep an eye out for any of the situations below (and more). Con artists continue to change their approach over time, but these are some of the classics.

Money mule: you receive payments, and you’re supposed to deposit the payments to your account and forward the money to somebody else. Often advertised as a work-at-home check processing job, these schemes are often problematic. In some cases, you’re laundering money for criminals. In other cases, the first few payments are fine, but eventually you’ll get a fake check (after they’ve gained your trust) and you’ll lose money.

Foreign wealth scams: somebody you don’t know reaches out to you and asks for your help transferring a large sum of money out of a corrupt nation. In exchange, you can keep a tiny fraction of the transfer, which is more than you make in a year. Of course, you’ll have to send money to somebody to complete the transfer (which will never arrive).

Inheritance and lottery scams: you’re about to receive a lot of money, but you’ll need to pay a small amount for taxes or legal fees to “release” the funds. It’s a small price to pay for the riches that are headed your way. Of course, they’ll never materialize.

Property rental scam: somebody is moving to your area for a new job. They’d like to pay the first and last month of rent (and security deposit) with a cashier’s check before they ever see the property. The day after you deposit the check, they say there was an issue with the job – they’re not coming, so they don’t need the rental. You can keep the security deposit, but they’d like for you to return some of the rent. After you send the refund, you’ll find that the check was a fake.