You may have heard about the TikTok viral "Chase Glitch," which claimed to be a quick-money-making method through an alleged ATM "hack." Over Labor Day weekend, reports circulated on TikTok and X claiming that Chase Bank was experiencing a glitch allowing people to withdraw funds from a deposited check right away. This illegal practice is known as "check kiting" and has been around for a long time. It is classified as bank fraud and can be prosecuted as a felony. A spokesperson for Chase stated that Chase is aware of this incident and it has been addressed.
Check fraud is not a new issue, but recently banks have reported a sharp increase in cases. In this instance, account holders wrote checks to themselves without having the funds to cover the amount, deposited the checks in their own account, and then withdrew the amount that was made available before the check cleared and thus falsely believed that it was a “hack.” Many users, unaware that they were committing fraud, later posted alarming videos on social media showing negative balances in their accounts. Check kiting can take many forms and is usually perpetrated by someone other than the victim. For example, a fraudster mails a check to an acquaintance and asks them to deposit it on their behalf, usually citing plausible reasons as to why they are unable to do so themselves. The scammer then asks the victim to send them back a small amount of cash, with the intention of never repaying that cash and leaving the victim on the hook for depositing a fraudulent check.
The "Chase Glitch” highlights a troubling trend of financial "pro-tips" and “quick hacks” spreading social media platforms. These so-called shortcuts are often far from helpful—in fact, they can be downright harmful. At best, they provide poor advice that will not boost your finances, and at worst, they promote illegal activities. For example, last year, TikTok user @greenthumbgotbands claimed that you could buy a $100,000 watch on a business credit card and never have to pay it off. The user suggested that business credit shields you from personal liability. However, even with an LLC, you can still be personally responsible for business debt, especially if it is clear that personal and business expenses are mixed —like splurging on an expensive watch. This could also lead to your credit card company shutting down your business’ credit line. Earlier this year, another TikToker (@psmillan_) caused a stir by promoting a "simple" trick to increase your credit limit: sending invoices to your own LLCs and paying them off with a credit card. This creates the appearance of high income and heavy credit card usage, which are factors used to boost credit limits. However, this tactic likely constitutes fraud as well.
Unfortunately, these types of scams and misleading advice are becoming increasingly common. The Federal Trade Commission reported record losses to scams last year, with 2.6 million cases amounting to $10 billion. With the proliferation of online banking and finance apps, the safeguards around making informed financial decisions have diminished. It is easy to make a few taps on a screen without thinking about it too much or consulting a financial professional. Also, there is a sense that the money is not tangible; it shows up as a bunch of numbers on a screen as opposed to cold, hard cash. Thus, it is easier to overspend and even easier to get scammed. Furthermore, research shows that younger people are more likely to fall for these scams than older people, given their tendency to spend more time online and lack of financial knowledge. This can be mitigated with proper personal financial education, as well as understanding personal finance, such as bank accounts, credit cards, mortgages, and other forms of credit can go a long way in reducing these types of risk and enhancing one’s personal financial well-being. It also plays a critical role in combating financial fraud. Here are some ways it can aid in minimizing financial fraud:
Improved Understanding of Financial Products and Risks
Educated individuals are better able to assess the risks and benefits of financial products, making it harder for scam artists to exploit their lack of knowledge. By distinguishing between legitimate investments and schemes like Ponzi or pyramid schemes, individuals can avoid falling prey to investment scams. A solid understanding of investment risks and basic principles, such as risk diversification allows people to be cognizant of and reject deceptive investment pitches, protecting them from misleading schemes like boiler room operations and pump-and-dump schemes.
Recognizing Red Flags in Offers
Financially literate individuals are better equipped to recognize common warning signs of scams, such as promises of guaranteed high returns, unsolicited investment offers, or pressure to act quickly. Knowing that legitimate investments do not promise returns without risks helps individuals steer clear of schemes that seem too good to be true. This awareness promotes critical thinking and skepticism, reducing the likelihood of making impulsive decisions based on emotional appeals.
Understanding of Data Security
Educating oneself about safeguarding personal and financial data reduces the risk of identity theft and account breaches. Knowing the importance of secure passwords, avoiding public Wi-Fi for banking, and recognizing phishing emails can help prevent fraudsters from accessing sensitive information.
Understanding the Risks of Cryptocurrency and Digital Assets
With the rise of digital currencies, it is essential to navigate the complex and often risky world of cryptocurrencies carefully, avoiding fraudulent ICOs (Initial Coin Offerings) and fake digital wallets. Understanding how to evaluate the legitimacy of cryptocurrency platforms and investments helps prevent falling for various scams or fake exchanges.
Enhanced Knowledge of Scams Targeting Vulnerable Groups
Financial education can offer crucial insights into scams that frequently target the elderly and other financially vulnerable individuals. By understanding tactics such as lottery or charity scams—commonly aimed at seniors—people can better protect themselves and their loved ones from these deceptive maneuvers.
The internet is unfortunately rife with get rich quick schemes and so-called financial gurus promising easy money in no time. It is vital to keep in mind that there is no such thing as easy money. These “experts” are preying on young adults who are growing increasingly disillusioned with the American dream and are slowly losing confidence in their financial stability. Financial education empowers individuals to recognize, avoid, and respond to financial fraud, serving as a strong defense against a wide array of financial crimes.
Do not let viral trends derail your finances. Contact us today for expert financial education and tailored investment advice to help you build a secure and prosperous future!
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