How to Avoid and Deal With Bank Fraud

Bank fraud can have a devastating impact on your financial health, potentially leading to significant monetary losses and damage to your credit score. This kind of fraud has become more prevalent with the widespread adoption of the internet and on-the-go banking solutions.

Unlike fraudulent charges on a debit or credit card, you have limited recourse if you inadvertently transfer money out of your bank account — so it’s especially important to understand how fraud works, how to avoid it and to act quickly if it happens to you.

In 2022 consumers reported losing nearly $8.8 billion to various types of fraud, according to the Federal Trade Commission (FTC). The rise of digital and mobile banking has made banking more convenient, but has also opened new ways for fraudsters to scam people. Bank fraud is any criminal act where someone tries to compromise your financial accounts or profile. It includes things like identity theft, check fraud and online banking scams.

Online banking scams often involve phishing emails or fake websites designed to trick you into revealing your banking details. Financial losses resulting from bank fraud or scams are typically not covered by the Federal Deposit Insurance Corporation (FDIC), which means the money lost is highly unlikely to be recovered.

Bank fraud can be difficult to detect, but an early bank fraud alert can help prevent major long-term damage. Here are some potential warning signs that you should always be on the lookout for:

While many banks have protocols to help account holders in the event of suspicious activity, you can take proactive steps to recognize the signs of bank fraud before they become major issues. Below are some common types of bank fraud you might encounter and ways to handle it:

Phishing involves fraudsters sending emails or messages that appear to be from legitimate banks to steal your personal information. They often direct you to fake websites that look like your bank’s official site.

Automatic debit scams are when fraudsters access your checking account details, including your bank’s routing number and your account number. The fraudster might contact you via email, text or phone to gather this information and then set up automatic transfers from your account to theirs.

In an overpayment scam, a buyer sends you a counterfeit check for the excess amount. After you send the funds you’ll realize their check was fraudulent. A similar scam is the check-cashing or fake check scam. With this scam, someone provides you with a personal or cashier’s check to deposit and instructs you to transfer some of the funds to a third party. Later, you’ll discover that their initial check was fraudulent.

With IRS and tax scams, fraudsters often contact you by text, phone or email related to the IRS, taxes or unemployment benefits. The IRS doesn’t initiate contact through email, text or social media platforms to ask for personal or financial details.

Below are some common questions and answers to help you understand how to avoid bank fraud.