22 Jan If my bank writes a check, what happens if it’s stolen?

Q. I write very, very few checks and only when absolutely necessary. However, when I pay bills via my bank, the bank sends out checks to payees that don’t accept electronic payment. Wouldn’t those checks be similarly open to fraud? And if so, what responsibility does the bank have?
— Banking customer

A. Any check is vulnerable to fraud.

Let’s take a step back.

As you noted, when a bank does not recognize the payee for online banking, it will send out a paper check that includes your name and account number on it, said Jody D’Agostini, a certified financial planner with The Falcon Financial Group in Morristown.

They might be susceptible to fraud, but the risk is like you mailing a check, she said. There are some banks that send out checks that exclude the account holder’s account number, but each bank has its own methods.

D’Agostini said you should ask your bank what it does when it comes to check security.

You do have protections, though, in case any of these checks become the subject of fraud.

“Many banks are insured for financial fraud and will refund any money that is lost because of fraud and identity theft,” she said. “You should inquire with your individual bank to see what if any protections are in place.”

Overall, she said, banks do take many precautions for online banking including obtaining FDIC insurance, using data encryption which converts the information to a code that only your bank can read, as well as multi-factor authentication.

“Make sure when setting up online banking to use strong and unique passwords with two-factor authentication,” she said. “You should not access your account using public Wi-Fi or use a public computer for this purpose. Also, do not forget to log out when finished. You may also want to set up banking alerts.”

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This story was originally published in January 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.