An e-check is a more convenient, quicker, and cost-effective alternative to a traditional paper check.

But with check fraud and online scams on the rise, are e-checks safe? In this article, we’ll answer your question, discuss e-check security features, and provide helpful information about common types of e-check fraud.

How Does an E-Check Work?

There are three steps involved in an e-check transaction:

1. Authorization—This is when a business requests authorization from a customer. The customer authorizes the transaction usually by filling out an online form and providing e-check information, such as the amount to be paid, account number, and routing number
2. Payment set-up—The business enters the information provided by the customer into an online payment processing system
3. Fund transfer—The payment processing system submits the details to the ACH network, which withdraws funds from the payer’s account and deposits them into the payee’s account. This process takes three to five days, depending on the banks involved and the transaction’s timing

Are Electronic Checks Safe?

Yes, e-checks are generally a safe payment method for businesses and individuals alike. There are five reasons for this:

1. Encryption
2. Reversible transactions
3. Digital signatures
4. Reduced physical risk
5. Duplication detection

Encryption

E-check transactions are sent through the ACH network. This means that certificate authorities and protocols such as Secure Sockets Layer (SSL) and Transport Layer Security (TLS) safeguard transactions.

These technologies encode and scramble the data exchanged during the transaction, making it unreadable to anyone not authorized to see it. This ensures that online connections are private and secure, protecting your transaction data from cyber threats.

Reversible Transactions 

Unlike wire transfers, e-checks and other ACH payments can be reversed within a short period—usually less than five business days after check settlement—as long as the check hasn’t been cleared.

This provides protection against fraud, allowing users to catch and correct suspicious or unauthorized transactions before they become permanent.

Digital Signatures

E-checks are digitally signed, which creates a unique cryptographic fingerprint that can be generated only by the legitimate sender.

The recipient can then use this to verify the signature’s authenticity, ensuring that the e-check hasn’t been tampered with or altered in transit.

Reduced Physical Risk

Most check fraud involves physical checks being stolen from the mail and then altered by scammers.

E-checks can’t be lost, misplaced, or stolen from mailboxes. This reduces the risk of theft and tampering commonly associated with physical checks.

Duplication Detection

E-check systems can detect duplicate transactions. They send instant alerts to the users involved, allowing them to spot potential fraud early and prevent unauthorized withdrawals.

Are E-Checks Safer Than Credit Card Payments?

Credit cards are typically considered safer than e-checks. They come with strong fraud protection and dispute resolution features, offering higher levels of security than e-checks. 

However, like any other payment method, credit cards are also susceptible to fraud. Regardless of your online payment method, take safety precautions, regularly monitor your accounts, and promptly report any suspicious activity.

Here’s a table showing the most and least secure payment methods:

Most Secure Payment Methods	Least Secure Payment Methods
Credit/debit cards Digital wallets (ApplePay, PayPal)  ACH transfers E-checks Certified checks and cashier’s checks	Paper checks Cash Wire transfers Money orders Online bank transfers

Types of E-Check Scams

While generally a safe payment method, e-checks are vulnerable to fraud if not used carefully. E-check fraud usually involves scammers creating fake e-checks or tampering with legitimate ones to deceive victims and steal money. 

Here are the four most common types of e-check fraud to look out for: 

1. Counterfeit checks 
2. Returned check scams 
3. Unauthorized e-checks 
4. Altered checks 

Counterfeit Checks 

Counterfeit e-checks are fake checks designed to look legitimate. Fraudsters typically create these checks by using stolen bank account information or impersonating unsuspecting individuals. 

In some cases, they may even use sophisticated software to produce realistic-looking checks, often with fake names and bank logos that do not exist. They then deceive recipients into accepting or depositing these fraudulent checks, leading to financial losses.

Returned Check Scams 

Returned check scams are the most popular way fraudsters try to scam people out of money. Here’s how these scams work:

1. The scammer sends you a fake e-check to pay for a product or service. The e-check shows an amount that’s higher than the price
2. After you’ve received the e-check, the scammer will claim they “accidentally” overpaid you, asking you to return the extra money using a different payment method. They usually request wire transfers or payment through gift cards 
3. Once you’ve sent back the extra money, the scammer disappears and immediately cashes out your payment or uses up the gift card
4. The fake e-check eventually bounces and is returned as fraudulent

Unauthorized E-Checks

Unauthorized e-check fraud happens when scammers use your bank account details without permission. 

They start by stealing your sensitive bank information by phishing or social engineering, impersonating trusted officials to gain access to your personal information. 

Once they have your account info, they create unauthorized e-checks under your name and deposit them into various accounts. 

This e-check scam can quickly drain your funds and severely affect your credit score and financial standing.

Altered Checks 

In these scams, fraudsters manage to get hold of genuine e-checks and then alter their details. They might change who the check is addressed to, tweak the amount, or erase other crucial information. 

In most cases, scammers use software to intercept the electronic check and alter details before it is deposited. The goal is to divert the money meant for you or your payee into their account.

What Are the Consequences of E-Check Fraud?

Depositing a fake e-check can have serious consequences, even if you were unaware the check was fraudulent. They include:

• Full repayment—Unlike with paper checks, banks aren’t responsible for the money taken from accounts during e-check fraud as there’s no way they can know the transaction is fraudulent. As a result, you may be required to cover the entire amount of the fake e-check. The bank might even charge you an additional fee for handling the fake check
• Loss of funds—Any money you sent during an overpayment e-check scam is likely gone for good, especially if you paid it through a wire transfer or gift card. Even if you report the fraud, getting this money back is unlikely
• Account freeze or closure—If your bank detects suspicious activity, such as depositing fake e-checks or making sudden large transactions, they might freeze or close your account
• Legal trouble—If scammers create and deposit unauthorized e-checks under your name and account information, you may end up in legal trouble, even if you didn’t knowingly commit fraud

How To Report E-Check Fraud

If you’ve fallen victim to e-check fraud, it’s important to act quickly and alert relevant authorities as soon as possible. Take the following steps:

1. Collect important information and documents
2. Contact your bank
3. File a fraud report
4. Alert the credit bureaus
5. Keep monitoring your account

Collect Important Information and Documents

Gather all relevant details and documents related to the fraudulent e-check. This includes details of any correspondence with the scammer, including: 

• Names or titles used by the scammers 
• Social media profiles or groups used 
• The scammer’s email address or phone number 
• Records of all payments (including canceled checks or receipts for wire transfers or gift cards)
• A copy of the e-check
• Bank statements showing the transaction 
• Any other related records

Compiling this information is essential to reporting fraud and helping the authorities locate the people behind the scam.

Contact Your Bank or Financial Institution

Notify your bank or financial institution that you’ve been scammed. Your bank can help take action to protect your account, reverse unauthorized transactions, and provide guidance on the next steps. They may also have specific procedures for handling e-check fraud.

File a Fraud Report

File a fraud report with the Federal Trade Commission (FTC), local law enforcement, or state attorney general. Provide them with all the information and documents you’ve collected.

 Find the relevant contact details in the table below:

Organization	Reporting Method
The Federal Trade Commission (FTC)	Report fraud at ReportFraud.ftc.gov
The Internet Crime Complaint Center (IC3)	If the scam involved online communication, file a complaint with the IC3
State attorney general	Find resources related to your state attorney general here

Alert Credit Bureaus

Contact all three major credit bureaus to place a fraud alert or freeze your credit report. 

This can help prevent further fraudulent activity by making it harder for scammers to open new accounts in your name.

Here are the contact details of each bureau:

Credit Bureau	Contact Number	Website
Experian	(888) 397-3742	Visit the Fraud Alert Center
Equifax	(800) 685-1111	Place a Fraud Alert or Active Duty Alert
TransUnion	(888) 909-887	Place a Fraud Alert

Keep Monitoring Your Accounts

Keep a close eye on all your accounts for further suspicious activity. Regularly review your bank statements and credit reports to catch any additional unauthorized transactions the scammers may attempt to make.

E-Check Security Measures To Take

If your business or financial institution uses or offers e-check payments, use some of these security measures to protect yourself against e-check fraud:

1. Positive Pay System
2. Account verification services
3. A high-security banking platform

Positive Pay System 

The Positive Pay System (PPS) is a powerful tool for preventing check fraud. It covers both e-checks and paper checks.

To use it, you provide your bank or payment processor with a list of authorized transactions. When an e-check is submitted to your bank for processing, it cross-checks it against this list.

If the e-check doesn’t match an authorized entry or shows signs of tampering, your bank or payment processor flags it for further inspection. 

This can help catch and block unauthorized or altered e-checks, offering an extra layer of security against fraud. Generally, banks charge a fee for PPS, but some also offer it for free to attract new customers.

Account Verification Services 

Account verification services allow businesses to avoid the risk of accepting e-checks drawn from fake or compromised accounts.

Any time there’s an incoming e-check, account verification can confirm the legitimacy of the bank account linked to the check by comparing it against official databases and records. 

This process ensures the account is real and hasn’t been flagged for suspicious activity. It prevents fraudulent e-checks from slipping through, reducing the risk of financial losses for your business.

High-Security Banking Platform

Moving some of your cash reserves to a high-security banking platform like FortKnox adds another layer of security to your funds. FortKnox by Austin Capital Bank is an online banking platform focused on fraud protection.

Whether you’ve been scammed before or want to take precautions against fraud, securing your cash reserves with FortKnox is an excellent idea.