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Check kiting goes viral on social media. Is it bank fraud?
This September, thousands of misguided TikTok and X users took part in a viral trend involving Chase Bank. After learning about a so-called "infinite money glitch" through various posts, the social media users wrote themselves bad checks, deposited them via ATM, and then withdrew the cash right away.
Unfortunately, the "money hack" was actually a form of bank fraud known as “check kiting.” While check kiting is a decades-old scheme, many social media users are just now learning about its serious consequences. In addition to owing money back to their banks, people who kite checks can face bank fees, civil charges, and even prison time.
How does check kiting work?
Check kiting, also known as flagging, involves depositing a bad check into your bank account and then withdrawing or spending the funds. There are a few different ways to commit the crime of check kiting, but here's how it generally works:
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A person opens two separate bank accounts. Let's call them Accounts A and B.
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He or she writes a bad check from Account A and deposits it to Account B.
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The bank automatically credits the check amount to Account B, as many banks would do.
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He or she withdraws the amount credited to Account B before the bad check is rejected.
This form of checking fraud takes advantage of "float," or the lag time between when a deposit is credited to your account and when the transaction is processed and eventually canceled or reversed. Depending on the circumstances, the float can span one to seven business days.
During that period, a determined criminal can potentially steal significant sums of money by depositing checks back and forth between multiple personal or business bank accounts.
Types of check kiting
Most often, check kiting is done by people who want to buy themselves a few days until funds are available in the bank. But not everyone intends to pay back what they withdraw. There are many elaborate check kiting schemes performed by criminals, including these:
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Circular kiting: Writing and depositing a bad check from one account to another, sometimes while using fake identities.
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Retail kiting: Visiting a retailer and cashing a bad check or requesting cash back on a bad check. This may be followed by writing a check from a second bank account and depositing it into the first account to make sure the original transaction goes through.
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Endless kiting: Depositing a check that appears to be from a legitimate bank but has a fake routing number.
Kiting can also be done with other forms of payment. Credit card kiting, for example, happens when someone deposits a bad check to their bank account and then uses the temporary balance to make a credit card payment.
What are the penalties for kiting checks?
Check kiting is illegal, and there are a wide range of penalties you could face for committing this crime. In addition to giving yourself a loan from your own bank account, you might face a number of consequences, including:
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Bank fees: The receiving bank charges a non-sufficient funds fee and the sending bank charges a returned check fee.
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Debt: The overdrawn amount is owed back to the bank. If unpaid, it's sent to collections and the debt collector can sue for the money.
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Account closure: Account activity can be frozen and the banks may close both accounts.
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Banking reports: The incident is reported to ChexSystems or Early Warning Services (EWS), making it difficult for you to open a new bank account in the future.
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Criminal charges: Depending on the state and the number of offenses, there could be misdemeanor or felony charges resulting in fines up to $1 million or up to 30 years in prison.
How to prevent check kiting
If you're tempted to kite a check, remember it's a crime with serious consequences. Check kiting might appear to be a solution when you need cash, but the potential bank fees and criminal charges create a whole new set of problems.
The simplest way to avoid problems is to wait for bank deposits to clear before you spend the money. Even if a new deposit is reflected in your available balance, which usually happens right away, there's always a chance the transaction will be reversed in the coming days.
Another way to safeguard your account against overdrafts is to maintain a "cushion," or a small amount of money that you never spend. That way, if you have some room for error if you miscalculate your available funds.
Frequently asked questions
What is an example of check kiting?
A common example of check kiting is when a person knowingly deposits a bad check, and then withdraws the money from their bank account before the check bounces.
Is it illegal to kite a check?
Check kiting is illegal and carries penalties ranging from bank fees to bank account closure and can involve civil or criminal charges.
What is the difference between check kiting and check floating?
Check floating involves writing a check when you don't have the funds to cover it, but you expect the money to be in your account before the check clears. Unlike with check kiting, someone who floats a check is not committing a crime, but they can still face fees and account closure if the check bounces.
