Ralph Bovitz, CPA, PFS

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Beware of Possible Bank Fraud on Your Bank Statement

By Ralph Bovitz, CPA, PFS

     In the ongoing effort to save money, some merchants are beginning to “cash” your check by electronically charging your checking account for your payment, instead of processing your check the traditional way, through the nationwide check-clearing system.  

Here’s how it works: 

     You mail your check to your merchant or service provider – telephone company, credit card company or neighborhood plumber, for example.  The merchant uses the Routing Number on your check (a unique number assigned to your bank) and your personal checking account number, also on your check, to charge your check-payment to your bank account, electronically. 

What happens to your check? 

     The vendor or merchant retains it and should destroy the check.  If you want a copy of the check, you can call the merchant or your bank.   

The Problem

     The check amount shows up in the electronic activity section of your bank statement and not with the numerical list of other checks paid that month.  If you do not fully reconcile your bank statement and don’t notice the unexpected electronic charge, there is a possibility that you could be charged for the same check twice. 

     Here’s what happened recently in the case of one of my clients.  A local home repair service electronically charged my client for nearly $400, the amount of the check she sent for the repair.  A couple of months later, the check that was the basis for the electronic charge was presented to the bank by the merchant and was cashed by the bank. 

     Although we arranged to recover the duplicate payment, a nearly $400 bank charge, it is clear that without a complete and timely bank reconciliation, significant money would have been lost. 

What if you don’t want the merchant to electronically charge your account?

     You have to call the merchant and request the practice be stopped.  Your bank cannot end the practice and the merchant need not get your permission to electronically charge your bank account for your check payment.
















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