Check Fraud Is Way Up. Should You Stop Using Paper Checks?

When's the last time you wrote a paper check? Believe it or not, I actually did today, on the day I'm writing this article, to pay my city government for an annual parking pass. But prior to that, the last time was about a year ago -- and for the same reason. Checks as a form of personal payment are slowly going the way of the dodo. According to data collected by The Washington Post, checks made up just 3.8% of payments in 2022.

Why are checks going extinct? Well, there are a few reasons. For one thing, there are more convenient payment options available, credit and debit cards being chief among them. Checks require more labor and materials (like a pen) than simply whipping out a card at the grocery checkout. And if you're paying for a purchase using a check, it takes several days for that money to leave your checking account, making it more difficult to keep track of your balance and potentially increasing the odds you'll have an overdraft.

But there's actually a really compelling reason that all of us should be stepping away from using checks. Let's take a closer look at check fraud and discuss some alternative payment methods.

Check fraud 101

The COVID-19 pandemic brought a staggering jump in thieves targeting the mail to steal Americans' paper checks. According to the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN), mail theft complaints rose by 161% from March 2020 to February 2021 over the same period a year earlier. In 2021, there were over 350,000 suspicious activity reports by financial institutions to report potential check fraud -- and in 2022, this number nearly doubled to 680,000.

When thieves get hold of your checks, what are they doing with them? Bad news -- check washing is back in a big way. Scammers can use chemical solutions (like acetone, also known as nail polish remover) to remove the payment and payee information from a check (while leaving the signature intact). They can then fill in whatever amounts and payee they want, clearing out your bank account in the process. Scary!

Should you quit paper checks?

I understand that change is difficult, but it's time to start transitioning to other payment methods to help stamp out fraud. I get it if you don't want to use a credit card for all your payments and purchases. You can take advantage of robust consumer protections and earn credit card rewards by doing so, but sometimes you're charged extra to use a credit card, and if the percentage charge amounts to more than you'd earn in rewards, that's a net loss. Plus, if you're struggling with credit card debt, you might not want to use them at all, and that could be a safer choice for your personal finances.

But I recommend finding other ways to pay besides with personal checks. Cash is still accepted as an in-person payment in nearly all situations (although, it has no protections of any kind -- if you lose it, it's likely gone for good). Your debit card is another option -- use with caution for online shopping and at gas stations, where "skimmers" might be used to steal customers' payment information.

For your bills, many banks offer bill-payment services; these are very easy to use and once you schedule payments, you need only check that the money left your account. For paying friends and family, you could use a payments app. You definitely have options other than paper checks.

Tips for safer check payments

OK, OK -- you don't want to quit paper checks. Will you at least use the following tips to avoid check fraud?

• Don't mail checks from home: If you have to send checks through the mail, it's a better idea to take them directly to your local post office. You could also drop them directly in a blue mailbox, but aim to do so near a collection time, as these mailboxes aren't completely secure.
• Get the right kind of checks: Some have embedded security features, like watermarks and inks that will be damaged by check washing.
• Use the right pen: According to the Better Business Bureau (as told to ABC7 Chicago), black gel ink is the most resistant to check washing.
• Check up on your bank account: Keeping an eye on your balance is a personal finance best practice under all circumstances, but if you've sent a check, make sure it's received and deposited by the right party.

If you suspect you've been a victim of check fraud, contact your bank ASAP. And to avoid this fate, consider transitioning to a more secure payment method, like the ones discussed above.