How is credit card kiting considered a form of fraud?

These agencies collect information about how consumers have handled bank accounts and report that information to financial institutions as well as to retailers that accept checks as payment. Writing a bad check is illegal, and it can have serious repercussions on your credit. Find out more about writing bad checks, what the penalties are, how to avoid it and what to do if you accidentally bounce a check. Well, that is assuming that you have the funds to cover the check.

The employee records an in-transit increase in one bank account in Year 1, but records the decrease in the other account in Year 2. This fraud is most convenient and prevalent at period end, especially when there are often several legitimate items of cash always in transit between accounts. In a typical check kiting scheme, someone opens up two checking accounts. In the first account, our client would deposit funds, perhaps $1,500. For the second account, the client would write a check for $5,000 from the first account.

If the bank or credit union allows you to get a cashier’s check without having an account, you’ll need to come with cash in hand to cover the check’s amount. Many local District Attorneys have a bad check restitution program that will help you collect on bad checks. This varies by jurisdiction, but typically your customer will be contacted and given a chance to pay their debt to avoid prosecution. Carried out within the banking system, kiting typically involves passing a series of checks at two or more banking institutions, using accounts that have insufficient funds.

This can be seen as a felony in many states, especially when the checks are for more than $500. Most banks and credit unions charge a fee for cashier’s checks. The fees at some of the largest banks range from $6 to $10, although your bank may charge more or less. You may be able to get free cashier’s checks if you have a premium checking, savings, or money market account at the bank.

Again, just be ready to show your ID and provide the name of the payee and the check amount. If you’re a current customer of the bank or credit union, you’ll need to specify to the teller the account from which the funds for the check should be drawn. If you’re not a customer, you’ll need to pay the check amount in cash. For all three options, you’ll first need to check the issuer’s requirements for providing a cashier’s check. Some banks and credit unions limit cashier’s checks to people who have an account there.

Can You Write A Check to Yourself?

So for two months I was selling household furniture to survive until my Social Security kicked in, which amounted to $682, not enough to live on or pay amount owed on that check charge or on anything else. I might add that I still have that returned letter containing the second check written for that $25, still unopened, my only proof that I was not defrauding anyone. Under criminal penalties, you can be prosecuted and even arrested for writing a bad check.

Later, the cash that is received from a second account is applied to the first account to cover up the original theft. Either a certain amount of money has been taken, or this amount could be increased by the theft of additional funds. All customer accounts stay relatively current by the posting of later received funds from additional customer remittances. Kiting occurs when funds are stolen from the company and, to cover this theft, the employee transfers money from one bank account to another account right before year-end.

In 2016, American consumers paid $15 billion in fees for bounced checks and overdrafts, often unintentionally. Call your customer before you take more drastic action to collect on a bad check. As politely as possible, ask how he or she would like to pay–via credit card over the phone, or in cash ASAP. Anyway, so Bank 2 closed my account because of the check charge also.

If it does, you’ll need to log in to its website and select the account you’d like to use for the check. Depending on the institution’s menu navigation, the option to order a cashier’s check online may be included under the “Order Checks” tab.

You then follow the menu prompts, which means adding in the payee’s name, the amount, and any notes you want to include. The check will be mailed to the payee, which will likely take longer than if you get the check at the counter in-person and then hand-deliver it. A cashier’s check provides a measure of security to everyone involved in the transaction.

What Is Check Kiting? The Defenses? The Punishment?

A bad checks offense means you issued or passed a check knowing it would not be honored by the financial institution where you have your account. For example, if you wrote a check on a bank account you knew was closed. Your bank or credit union may also offer cashier’s checks online.

Corporate kiting

  • Call your customer before you take more drastic action to collect on a bad check.
  • As politely as possible, ask how he or she would like to pay–via credit card over the phone, or in cash ASAP.
  • In 2016, American consumers paid $15 billion in fees for bounced checks and overdrafts, often unintentionally.

The payee—the person receiving the funds—knows that the check won’t be returned, as it’s being drawn from the bank’s account. Because cashier’s checks usually have watermarks and require signatures from one or more bank employees, the bank has the reassurance that the check won’t be counterfeited. And you don’t have to worry about sharing your personal checking account information with the payee, as the check isn’t drawn from your account. A variant of check kiting is known as “retail kiting.” This relies on cashing a bad check (number one) at a retailer to purchase an item.

Certified checks are like cashier’s checks, but they’re drawn directly against your account. It’s essentially still a personal check, but it’s signed by both you and the bank. That means the bank guarantees the amount of the check to the payee.

It has also been used by those who have some genuine funds in interest-bearing accounts, but who artificially inflate their balances in order to increase the interest paid by their banks. In recent years, criminals have started taking advantage of the check float to pass fraudulent checks through solicited users of online auctions. Check kiting or cheque kiting is a form of check fraud, involving taking advantage of the float to make use of non-existent funds in a checking or other bank account. In this way, instead of being used as a negotiable instrument, checks are misused as a form of unauthorized credit. If you have a bad checks charge on your criminal record, it can easily be seen by any potential employer who does a background check.

How does kiting work?

Kiting is commonly defined as intentionally writing a check for a value greater than the account balance from an account in one bank, then writing a check from another account in another bank, also with non-sufficient funds, with the second check serving to cover the non-existent funds from the first account.

Retail-based kiting


Then, before that check has cleared, the kiter writes another check (number two), which may include (or entirely comprise) a cashback payment. While cashback is now most often associated with debit cards, some retailers still offer this convenience with checks. The other thing you will want to do is to ask Bank A if they report the bounced check to TeleCheck or ChexSystems.

Businesses do not want to hire someone who might steal from them, and a theft of any kind on your record will make them wary of employing you. In particular, it will be hard for you to get a job in banking, government or as a cashier. Check fraud occurs when someone steals your actual checks or reproduces them and is then able to cash those checks, pulling money right out of your bank account.

As banks typically take three business days (“float”) to clear a check, our client would then write a check for $5,000 and deposit it back in the first account. The checks would theoretically both clear when both really should bounce. Some kiting rings involve offenders posing as large businesses, thereby masking their activity as normal business transactions and making banks inclined to waive the limit of funds made available. Circular kiting describes forms of kiting in which one or more additional banks serve as the location of float, and involve the use of multiple accounts at different banks. This cycle repeats until the offender is caught, or until the offender deposits genuine funds, thereby eliminating the need to kite, and usually going unnoticed.

The purpose of check kiting is to falsely inflate the balance of a checking account in order to allow written checks to clear that would otherwise bounce. If the account is not planned to be replenished, then the fraud is colloquially known as paper hanging. If writing a check with insufficient funds is done with the expectation they will be covered by payday – in effect a payday loan– it is called playing the float. In Pennsylvania there is a big difference between bouncing a check by mistake and intentionally passing a check you know you can’t cover.

Just be upfront and honest with them; these things happen all the time. Tell them you’re trying to build good credit you want to make sure that this bad check someone wrote you doesn’t sabotage the process.

If they do report to either those bureaus you can request a free copy of your report each year. Those reports are used primarily when consumers open checking accounts, not when they apply for loans. Lapping occurs when cash is stolen upon receipt from one customer’s account.

Relying on the float time required for a check deposited at one bank to clear at another, the kiter typically writes a check at the first bank against an account at the other. The best way to avoid writing bad checks and dealing with the negative financial outcomes is to keep good records and regularly balance your checkbook. You can also take some of the following actions to protect your account against NSF fees and activity. However, these failed payments may be reported to specialized consumer reporting agencies such as ChexSystems or Telecheck.