[WARNING] Paper Checks Can Lead to Fraud

Category: Finance , Security

In March 2016, I wrote about electronic bill payment, and asked “Are You Still Paying Bills With Paper Checks?” The overwhelming majority of readers who left comments said that they do. Some recent news casts serious doubt on the safety of this practice. If you pay bills with paper checks, you MUST read today's article...


Even the organization that processes your check payments advises you to stop writing, mailing, and passing around paper checks. The National Automated Clearing House Association, or NACHA, recently said in a statement to Fusion online magazine,

“The most effective way for consumers to safeguard bank account numbers is to stop using paper checks. Since money transferred electronically passes through fewer hands than a paper check, electronic payments can be a safer option for consumers.”

Need more convincing? The author of Fusion’s article, Felix Salmon, dropped his checking account number and bank routing number into a content-management system used by all of his colleagues at Slack, just to see what might happen. “That’s not exactly top-secret information,” he wrote. “It’s on every check I’ve ever written, not to mention countless invoices and other forms. How dangerous could it be?”

Paper Check Security is an illusion

Kashmir, one of his colleagues, used his routing and account numbers to pay her American Express bill using the Automated Clearing House service. She just entered an amount, typed in Salmon’s account and routing numbers, and that was that. Money instantly left Salmon’s account and landed in American Express’ account.

Hard to believe, isn’t it? Salmon was incredulous himself, writing, “At no point did Amex or anybody else ask or seek my permission for Kashmir to raid my account to pay her credit card bill; instead, the money just disappeared one day. All that was left behind was an unhelpful note saying ‘Amex Epayment’.”

Paper Checks Offer No Security

If you're ready to say goodbye to paper checks, you have options. See my article Still Paying Bills With Paper Checks? to learn about various ways to pay bills electronically.

In response to the ease with which his money vanished, Salmon remarked: “This is, to put it mildly, suboptimal.” You have to admire Mr. Salmon’s flair for understatement.

While he did get the debit reversed, Salmon notes that he might easily have overlooked a smaller unauthorized payment, particularly if he was the kind of person - all too common - who doesn’t look at his bank statements very often. And it was a time-consuming nuisance to challenge the unauthorized debit successfully.

If someone emptied your checking account completely, how many days could you do without that money? Most Americans are one week away from total financial meltdown; if they miss a paycheck (or it’s taken from their checking account), they will suffer cascading waves of financial disasters.

The ACH system was never designed with online transactions in mind. It has no security features that can prevent the sort of thing that Salmon’s colleague did. Anyone who has your routing and account numbers can tell Amex or any other business that accepts ACH payments to take your money to pay his bills.

Salmon writes, “If I call up my bank and tell them that I never authorized the transfer, then they will reverse it, and the trail will lead back to Kashmir very quickly. If she didn’t have my permission to use my account to pay her Amex bill, the consequences for her could be very nasty indeed.” But what if “Kashmir” is nowhere to be found?

A Possible Fix for this Gaping Hole

It is rare, in the USA, to find an online merchant who accepts the sort of “ACH rail” that Salmon’s colleague used to appropriate his money for her benefit. (Shame on American Express!) Most online merchants insist on debit or credit cards. So this type of fraud is not easily perpetrated by the average person. But things could be very bad if the crook who has your routing and account numbers also has his own fake “company” that accepts ACH payments. Then he can just pay himself until your bank account is empty, and skip town. If he's operating from outside the country, tracking him down is exponentially harder.

Salmon says there is a simple fix for this gaping hole in ACH security. “All they would need to do is require permission from the bank account holder if the names on the accounts don’t match. Is that really too much to ask?”

In other words, if I am trying to pay an Amex bill that is not in my name, somebody at my bank or the ACH system should stop the transaction and call me. But apparently, that is too much to ask!

The only remaining fix is to stop using paper checks, which spread your routing and account numbers all over Creation. Just stop. Use plastic, or Paypal, or money orders or “bank checks” that bear your bank’s account info, not yours.

Your thoughts on this topic are welcome. Post your comment or question below...

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Most recent comments on "[WARNING] Paper Checks Can Lead to Fraud"

(See all 36 comments for this article.)

Posted by:

10 Jun 2016

Your statement "The only remaining fix is to stop using paper checks…" almost wants me to reply back with: "Are you on the bankroll of financial institutions… or sumfin?"
This is the wettest dream a bean counter can ever have. Their next target is paper money but that has been their wildest fantasy for many decades!
And I hope I never hear you state "The only remaining fix is to throw away your wallet" because someone can pick-pocket it… or sumsuch.

May be you were too young to remember >> “In 2003, Congress passed the Check Clearing for the 21st Century Act (Check 21), which was designed to enhance payment system efficiency to processing … checks electronically.”
Ever try to deposit an institutional check over $5k >> then, ever compare how much LESS time (to clear the bank) it takes if you write a personal check over $5k?

Frankly speaking, I don’t really want to live in such a digital world, where I go around waving a smartphone for all my transactions. And I’d rather continue to try slowing down the banking system’s advantage with using paper checks and paper money, instead!


Posted by:

Terri T.
10 Jun 2016

I completely concur that electronic banking is at the least, as safe if not safer than using paper checks.

Check fraud, the simple act of stealing checks and forging the signature is an age old crime. Payment by check is only as good as the human being who you must trust to deposit it into the proper account.

Many years ago - before computers were in every home - I paid my credit card bill at the bank drive thru window. When I got a late bill from the bank, it was pretty clear that something went awry between my hand and the final destination. The teller was fired and my account was properly serviced, but I have never had much faith in personal banking since that occasion.

When I can get a confirmation number that my bill has been scheduled to be paid and ON TIME, then I am happy. As pointed out, any lateness problems must be reconciled by the bank, and don't cost me.

I am, however, careful not to "store" my credit card information on sites. I will gladly go through the trouble to re-enter all of the information for each transaction, for the sake of added security.

Posted by:

10 Jun 2016

Some businesses don't accept credit cards because the credit card vendors take a percentage of their gross receipts. Many entities charge "processing" fees for the "privilege" of using credit cards. Like a previous post, every penny counts & I need all my pennies.I don't carry checks with me unless I'm going to pay in person. I've had more problems with illegal credit card use by others than I've ever had with checks. However, I use electronic payment whenever feasible. Easy & convenient.

Posted by:

10 Jun 2016

Funny to read this. In my country - Denmark - the banks have decided to abolish the check clearing arrangement, since nobody uses checks anymore. Virtually everyone 15 years or older have a no-fee debit card and the majority have some form of electronic payment app on their smartphone. Banks are required to offer a no-frills bank acoount with a debit card to all residents and all government welfare payments and wages (for both government and private industry employees) are automatically paid to this account. For us, checks are very much so last century.

Posted by:

10 Jun 2016

I prefer to send a cheque (that's how we spell it in UK) when ordering something by post, otherwise I have to give my email address and/or phone number, leaving me open to junk mail or unwanted phone calls.

Posted by:

10 Jun 2016

True... a paper check passes through more hands and the check information can be more easily stolen.

Also true... thieves can obtain the information of millions of people by hacking just one electronic database.

Six of one...

Posted by:

10 Jun 2016

I am 72 & wrote many a check, in my day. During the early 1990's, Direct Deposit became available with my Hubby's company, Lockheed. We both jumped on it. Then, a couple of years later, my hospital started doing Direct Deposit & boy, did I jump on that, too!

What a time saver, not having to go to the bank, to cash checks or deposit them. We both got a copy of our checks & the bank recorded them, so we could easily show proof of the deposit.

I started using my Debit Card, as soon as I got one. It was a lot easier than carrying around a lot of money! Then, I discovered Web Bill Pay! What a great way to pay many of your bills. Once again, saving time & energy! Not all of my bills are paid by Web Bill Pay. I want immediate electronic paying, not sending out "checks" to those who aren't setup for electronic payment.

I haven't written a check since 2001. To date, I have not had any issues with using my Debit Card, either. Yes, I have had to have my Debit Card replaced, due to some compromise by Visa, but I haven't had any issues with someone else using my card.

I prefer to use my Debit Card online. I will NOT write in my Debit Card number on any paperwork. Too easy to copy the numbers & do some bad stuff. The numbers are scrambled online when going from my computer to the online store-front.

Yes, there are sometimes extra charges, but, they have been reasonable, anywhere from a dollar to five dollars. Now, my rent company will allow online payment, but, I will NEVER use that service when the charges are almost $30!!! Now, that is highway robbery!!!

Remember, I am 72 & use all of the electronic means that I can. First of all, I can save gas & money by doing things online. I do use Walmart Money Center or Kroger for those times, that I need a money order, for instance paying my rent! The money order only cost me $.90 or $1.25, a real bargain in my book. The rest there are no charges, so it's even steven for me & I stayed at home relaxing. :O)

Posted by:

10 Jun 2016

Okay, so what's worse than having some scammer steal your money by procuring your account information from a paper check? How's about when the government itself steals your money simply by swiping your bank card during an illegal search?

At least if a government entity tries stealing your bank cash by check-fraud, there may be a paper-trail you can mitigate it with. But when they use your own bank/credit cards to electronically impoverish you, it seems that you become SOL much more completely.


Posted by:

Roy Starrin
10 Jun 2016

My problem is my wife. Though I work in computers, she is not computer literate, has problems with a basic cell phone, and at our age (80s)not interested in making progress. But she doesn't want me paying electronic bills by EFT, she wants to hold onto her ability to write the checks in response to mailed bills as long as she can. So she writes them, I double check them, correct mistakes. and send them on their way.
The only out I can see is to take the bills/checks out of the envelope, pay by transfer (I can tag the check number with a digital number) and simply throw the empty envelopes away.
Haven't started yet, but am almost there. She would never know

Posted by:

Robert van Ruyssevelt
10 Jun 2016

American Express is a particularly loose operator. I started getting charges on my Amex account for a periodical which i didn't order. They refused to reverse the charges because I had once bought a book from that publisher and given them my Amex account number for payment! Eventually i got the publisher to stop sending the journal but Amex never gave me a credit!

Posted by:

10 Jun 2016

Apparently some women on here are quite gullible. Most credit cards protect you against fraud. Checks are gone once written unless you take your own actions which are generally fruitless. Debit cards are roughly the same since they come from a checking/saving account. Checks to family members hopefully are no risk unless they are a risk to begin with. Even worse w/checks is identify theft. Some individuals even put license # and DOB on checks from the old days to pay easier. NoNo!

Posted by:

Dave Fox
11 Jun 2016

Great article Bob, People need to wise-up. Any Bank worth a salt, will have a Bill-Payer program that is free for the clients. Enter the Payee account # one time, and the amount, and your bank pays your bill for you. The big loser is the Post Office, because you no longer have to buy stamps, and you do not have to use checks anymore.

Posted by:

11 Jun 2016

In Canada there's an app for taking a photo of a cheque with your cell phone and depositing it to your account. The cheque never makes it to the bank. If the recipient has more than one bank account and forgets that they have deposited it they can deposit again to another account and out of your account goes the money for the second time. This could even be done deliberately. It hasn't happened to me yet but I write very few cheques and the couple of credit card disputes I have had were both settled in my favour quickly and amicably with the card issuer.

Posted by:

11 Jun 2016

In Canada almost no merchants accept cheques. I'm always amazed when I come to the US as to how many supermarkets and other stores willingly accept cheques. Everyone here uses their debit card.

Posted by:

Jay R
11 Jun 2016

DanD- according to the Gospel of Bob, I rarely follow links, but I did so with yours. Scary stuff. The next time I go thru Oklahoma, I will be sure not to have cards with me. Or at least nearly empty the account before I cross state lines. I wonder what sort of book Orwell would write today. I know what lyrics Rogers and Hammerstein would write. Oklahoma, not OK.

Posted by:

12 Jun 2016

with all this fraud I guess a chip implanted in our hand or forehead and connected to the account might be the "safer" way. There is that old buy nor sell without the mark of the beast problem that arises. I guess that's OK for the masses who have already sworn their alliances to the tech God, for the rest not so much.

Posted by:

13 Jun 2016

To minimize the possibility of what Bob describes, I keep $1.35 in my checking account and make an ETF when I occasionally write a check. So at least I am lowering the odds that I'll get robbed.

Posted by:

Aidan Farr
13 Jun 2016

Hi Bob.
I live in Denmark, where nobody accepts paper checks any more, except banks. If the check is issued by another bank, or an insurance company, then it will usually be credited straight away (with the proviso that if it bounces, the bank will rescind the credit of it from the date that it accepted it). I have neither used nor seen a personal check for many years now. I don't think they're printed any more.

Posted by:

13 Jun 2016

Using money orders is not much better. I remember when a money order company went bankrupt and the money orders bounced and the purchasers were out of luck.

Posted by:

14 Jun 2016

What I find of interest is when I have tried to set up direct deposit for some of my incoming payments (like dividends) and the company *requires* that in order to set up a direct deposit arrangement I HAVE to provide a "voided" paper check with the bank routing numbers and my account numbers on them.

As mentioned above, most banks even here in the US no longer provide paper checks when you open an account. Last time I opened a checking account (which was about two months ago) all I got was a plastic (and non-chipped) debit card. If I wanted paper checks I would have to get the routing info from my bank and order them myself from a check printing company...

As for businesses, at least Aldi recently started accepting credit cards as well as debit cards, but will not take checks. I still know of a few businesses I deal with remain cash only. Still quite a mish mosh of who accepts what.

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