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The Dangers of Check Kiting
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Financial Expert
Posted March 23, 2017
What is check kiting?
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When you cash a check, it may take from a few days to a week for the money to be withdrawn from the check writer’s account. Before the check clears, the money will make its way through the check writer’s account and the account of the recipient.
Check kiting – also called “floating a check” – occurs when a person writes a check to themselves knowing there is not enough money in the account to cover the check. Because it takes a few days for the check to be processed, it temporarily appears as though there is more money in the account than is really there.
For example, if someone had two accounts, they may have no money in either account, but write a check for $100 from “Account 1” and deposit it to “Account 2.” Until the check finishes processing, it will appear this person has $100 in “Account 2,” when nothing is in the account.
Why is check kiting wrong?
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While there are people who fraudulently open accounts with the intent to kite checks in order to steal money from financial institutions, some people kite without realizing they are doing anything wrong. They may see it as giving themselves a temporary loan that will be paid back before a check bounces. However, check kiting is considered fraud, and it is illegal. Although the account holder’s intent may not be malicious, knowingly writing a bad check is fraudulent.
What are the consequences of kiting?
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The consequences of check kiting vary depending on the financial institution and the severity of the fraud. In some cases – generally, if the money is paid back – the financial institution may allow the check kiter to keep the account but remove some of the offender’s privileges, such as the ability to deposit personal checks or make ATM deposits. In other cases, the financial institution may close the account and report the check kiter to ChexSystems – an agency for checking accounts that is similar to a credit bureau. If ChexSystems has a negative report on file, the kiter may not be able to open additional savings or checking accounts. Not having an account can make it difficult to receive payroll deposits, make purchases, and pay bills. In severe cases, the kiter may be charged with fraud and face fines or prison time. Being short on funds can be stressful, but the consequences of check kiting are never worth the risk.
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