Friday, October 14, 2016

How Money Order Scams Work?

Money order scams are common when selling items online. Before handing over merchandise or money, be sure you’re dealing with a legitimate buyer. Be especially careful if you’re asked to send money after receiving a money order.

A scam takes place when somebody pays with a fake money order. Assuming the payment is good, the recipient moves forward with the "buyer's" request (shipping goods or wiring money).

Once the recipient's bank discovers the problem, it is too late to recover products or funds.

Why Money Order Scams Work

Money orders can be a safe way to receive payments. Unfortunately, the sense of security you feel causes you to drop your guard. These scams work because you believe you’ve been paid and there’s nothing more to worry about. In fact, you should always treat money orders (like personal checks) with caution.

Review the Basics of Money Orders

Typical Money Order Scams
"Excess" scams: a typical approach involves an inquiry from somebody far away – another state or country. They say they’ll buy your item, but when the money order arrives it’s for much more than it should be. Why? The buyer will ask you to send the excess money (above and beyond your sale price) somewhere. Perhaps you’re supposed to send the funds to an expensive shipper who handles overseas transactions. Perhaps the buyer will ask you to refund the excess because he couldn’t get a money order for the correct amount.

In any case, you’ll lose that money for good if you send it.

Purchase scams: sometimes a money order scam is much simpler: you just get a fake money order and ship your merchandise. The buyer doesn’t ask you to send cash – they just get the goods for free.

Deposit scams: in other cases, somebody will ask you to deposit (or cash) a money order for them.

They (according to their story) don't have a bank account yet and they don't want to pay steep fees at a check cashing store. Instead, they'd like to sign the money order over to you and possibly even pay you for your time. What could go wrong? Surprisingly, your bank might let you walk out with cash, but that's not the last you'll hear of this money order.

Where Things Fall Apart

If you send (or spend) money that you think you got from a money order, expect problems with your bank. When you deposit a money order into your account, your bank will allow you to use some or all of the deposit immediately. However, the bank has not yet collected the funds from the money order issuer – that’ll take a few days or weeks.

When your bank tries to collect the funds (from Western Union, let’s say), they’ll find out that they’ve got a bogus money order. They won’t get any money, and they’ll deduct the fake money from your account. If your account is empty, you’ll go into the negative and you’ll have to repay the bank.

Plus, your checks will bounce and your debit/ATM card will temporarily become worthless.

If all of this sounds familiar, thieves use the same approach with cashier's checks.

Protect Yourself

What can you do to protect yourself from money order scams? The best thing you can do is work with people you know and trust. But if you want to work with new customers, you may have to expose yourself to some risk  – so you'll need to watch for behavioral cues.

You’ll be able to spot most money order scams a mile away if you pay attention. But when life gets busy it’s easy to miss a detail and forget how these scams work. A major red flag – and something you should never go along with – is a request to send or wire money after you’ve been paid with a money order. Other red flags:

An offer that came from out of the blue (how did this generous, trusting person find you?)
International money orders (although fake USPS money orders are also a problem)
Messages with numerous grammar and spelling mistakes
Refusal to pay you electronically (they can’t wire money or use an online service)
Your buyer is not interested in checking out the merchandise or product details, and doesn't seem to know anything about what he's buying
Your buyer asks for sensitive information like your bank account number, etc
It sounds too good to be true
Always verify funds when you’re paid with a money order. Call the money order issuer and check to see if you’ve got a legitimate document. You can never be 100% certain, but you can improve your chances.

See how to Verify Funds on a Money Order

Each money order issuer can also describe the latest security features printed on their money orders. For example, USPS money orders feature a Ben Franklin watermark, while MoneyGram uses a heat-sensitive patch to reduce fraud.

If you have any doubt, don’t spend the money you get from a money order. Treat it as suspect or be prepared to repay the bank. It can take weeks or months for the bank to figure out that you’ve deposited a bad money order. Most of the time you’ll find out about fraudulent items within a few weeks, but it can take longer.

Feel free to ask your bank for help. They’ve seen money order scams before and can talk about any suspicious transactions with you.


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