Check Kiting

Check kiting summary: 

• Check kiting is a form of financial fraud that involves writing bad checks from accounts with insufficient funds. 

• A check kiting scam usually involves multiple bank accounts, with bad checks from one account being deposited into another. 

• Check kiting is illegal, and scammers could face prison time and fines if charged and convicted. 

Check kiting definition and meaning

Check kiting is when someone intentionally writes a bad check and deposits it into another account with insufficient funds. Once the check is deposited, the check writer withdraws the amount from the second account.  

This juggling act allows the check writer to essentially steal money that doesn't exist from the bank. Check kiting is possible because it can sometimes take several days for checks to clear. 

A scammer can deposit a bad check, pull money from the account it went into, and disappear before the bank catches on. They essentially get a short-term loan from the bank, only they never pay it back. 

Key concept: A form of fraud involving bad checks. 

More on check kiting

You work hard for your money, so you want to hang on to it. At the same time, there are plenty of scammers out there who would like to separate you from it. 

Financial scams are nothing new, and they seem to claim more victims every year. One of the oldest scams involves check kiting, or floating bad checks. 

Most often, it's the bank that suffers when someone pulls off a check-kiting scam. If you run a business that accepts checks, that could also make you a target. 

Check kiting: a comprehensive breakdown

Check kiting is a way for scammers to steal money from banks by writing bad checks from one account and depositing them into another. This practice has been around for over a century and there are a few variations on how check-kiting scams work. 

In general, check kiting works by moving money that doesn't exist in a circle. Checks go from one account to another, only there are never any actual funds to back them up. If it sounds illegal, that's because it is. 

Here's how a typical check-kiting scheme works:

• A scammer opens two checking accounts, usually at different banks. They deposit nothing or very little money into both accounts. 

• The scammer writes a check from the first account, then deposits it into the second account. 

• After they deposit the check, they wait until the amount is credited to the second account, then withdraw it before the first bank can process the check. 

Throughout all of this, the check has never actually cleared. So, the bank doesn't know there are no funds in the first account to cover it. 

That gives the check kiter enough time to withdraw the money from the second account. Once the banks catch on, the money is gone. 

Kiting schemes can involve just one person or a network of people. The more elaborate the scam, the more money banks stand to lose to kiters. If a scammer gets caught, they could be charged with financial fraud at the state or federal level. 

Check kiting real-life example

You'd never try to kite checks, but you might be interested in how these scams work to add to your own financial literacy. We've already given an example of what's called circular check kiting. Here's another way this scam can work. 

• A scammer has two accounts, one at Bank A and one at Bank B.

• They write a check from Bank B and deposit it in the account at Bank A. 

• The next day, they write a check from Bank A and deposit it in the account at Bank B. 

• As each bank waits for the check to clear, the scammer withdraws funds from both sides. They may also make additional check deposits to each account. 

• They keep repeating the process, withdrawing money while the banks move money that doesn't really exist back and forth. 

• The scam only ends when one or both banks realize what's happened. 

This kind of check-kiting scheme is called a shell game. The shell holds the money, which can grow over time as the scammer continuously makes new, fraudulent deposits. Regardless of what a check-kiting operation looks like, it's all illegal and best avoided.