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Profile of a Bad Check Writer

Posted by Harrison Friedes | Mon, Jun 17, 2019 @ 12:45 PM

Black hooded figure against black background.Businesses that accept checks as a form of payment without a check guarantee service should certainly concern themselves with the question, “Who writes bad checks?” These merchants want to avoid accepting bad checks, and they can decrease the likelihood of doing so by better understanding who’s writing them and which check writer characteristics should be monitored.

Who Writes Bad Checks?

Bad check writers hail from all areas and can be understood based on their reasons for writing a bad check.

The One-time Bad Check Writer

The most ideal type of bad check writer (if there is such a thing) — the one-time bad check writer — simply bounced a check by mistake. He either forgot the associated checking account was closed or low on funds (i.e. made an accounting error) or simply miswrote a part of the check. The bad news is the one-time bad check writer is hard to prevent as their mistake is usually an innocuous one. The good news is recovering payment from this type of consumer is generally a non-issue.

The Frequent Fraudster

A more dangerous bad check writer, the frequent fraudster has experience bouncing checks and oftentimes knows what he’s doing. Frequent fraudsters are more likely to target markets with highly re-sellable products, such as jewelry stores or retail automotive.

Specifically, there are several different types of check fraud to watch out for:

  • The term “forged check” is most commonly used to describe a check that features a forged or unauthorized signature. Forgery can occur when a criminal steals and modifies a check for their own nefarious purposes.
  • A counterfeit check is one that is entirely fabricated. Counterfeit can be as simple as photocopying a check or as complex as fabricating one with a high-resolution laser printer.
  • Alteration is the use of chemicals to remove or replace information on an existing check.
  • Paperhanging is when a bad check writer intentionally writes a check from a closed account, thereby leaving the payment “hanging”. Paperhanging is perhaps the most difficult type of check fraud to prevent as there is no indication it is illegitimate at the time it is received.
  • Check kiting involves taking advantage of the float — the time it takes for funds to leave a check writer’s account and be deposited in another — to make use of non-existent funds. Check-kiting is effectively a form of unauthorized credit.

Careful examination of the check-in question can help prevent most types of frequent fraudsters. Vendors can use easy-to-remember tips such as feeling the edges for perforations or looking for a low check number. The lower the check number, the higher the risk of fraud, as fraudsters frequently open new checking accounts to further propagate their scams. For a more complete list of how to recognize a bad check, see CrossCheck’s "10 Tips to Spot Fake Checks."

The Risky Dice-Roller

The risky dice-roller “rolls the dice” on whether or not they have enough funds in their account to cover the cost of a check. This type of check writer differs from the one-time bad check writer as he knows he may not be able to afford the payment, and the frequent fraudster, as he is still genuinely attempting to pay for the purchase in question. While frequent fraudsters may need to be tracked down to the ends of the earth to be brought to justice, collection efforts with the risky dice-roller can usually be worked out if handled properly.

How Do Bad Check Writers Harm Merchants?

Bad check writers harm merchants by depriving the company of revenue that could otherwise be used, and by creating lengthy and unnecessary work for its employees.

A bad check means revenue the merchant can’t put towards beneficial expenditures. On top of that, without a check guarantee service, every single bad check must be dealt with individually, forcing employees to spend their time on preventing drawbacks rather than improving results.

What Can Merchants Do About Bad Check Writers?

Merchants have several options for dealing with bad checks. They can contact the customer, send a certified letter compliant with state law, call the bank to request documentation, report the fraud to local authorities, pursue small claims court, or when dealing with a large enough amount of revenue lost, hire a collection agency. The common denominator between all of these? A lot of work that may or may not bring revenue to the company should already be accounted for.

Let CrossCheck Guarantee Your Checks

CrossCheck has over 35 years of experience in providing Check Guarantee services to merchants in need. With Check Guarantee, a business doesn’t need to concern itself with bad checks, as CrossCheck guarantees payment on them whether or not they are good. Returned checks from any of the three types of bad check writers are no longer a problem for vendors with Check Guarantee.

CrossCheck uses a database that tracks several factors pointing to the likelihood of check fraud in order to better mitigate the risk of accepting bad checks. Our in-house department tracks check writers in this database on a merchant level to make sure fees are reasonable and returns are low.

Learn more about how Check Guarantee can help increase sales and mitigate risk while saving time and money for your business.Check Guarantee Insider's Guide

Topics: Check Fraud

Written by Harrison Friedes

Inbound Marketer with Crosscheck, dedicated to giving you clear and informative content that will add to your business practices.