How to protect against cheque fraud

If followed properly, the rules for writing cheques make them a safe method of payment for individuals and businesses.

There are seven steps to guard against cheque fraud:

• Cross the cheque by drawing two parallel lines vertically through the middle of the cheque. Write the words "not transferable" between the lines. You can also use "non transferable", "account payee" or "a/c payee." This means the cheque must be paid into the bank account of the party named on the cheque. A cheque marked "not negotiable" can still be transferred to another bank account.
   
• Cross out the words "or bearer". This prevents the cheque being deposited into another account. If you correctly cross cheque, but forget to cross out "or bearer," it can be transferred to someone else.
   
• Write the name or company as clearly as possible.
   
• Leave no gaps before or after words or figures.
   
• Keep your cheque book in safe place - not your car's glove box.
   
• Notify the bank immediately if your cheque book is lost or stolen.
   
• Never pre-sign cheques. If you ask, most banks will provide cheques with "not transferable" pre-printed on them. Westpac says it will begin printing cheques with this phrase and with "or bearer" removed, unless specifically requested by a customer.

Most banks have similar guidelines printed on the inside front cover of their chequebooks - but these are sometimes less than comprehensive. We found two banks whose advice forgets to mention crossing out the words "or bearer"; and advice in one of the Banking Ombudsman's newsletters on how to correctly cross a cheque also neglected to mention it.

Other scams

Be on your guard for cheques that may not be legitimate.

Good-quality printers and scanners have allowed some fraudsters to print their own realistic-looking cheques. Some have even been made to resemble bank cheques and used to purchase high-value items such as cars. So if you're in any doubt, refuse to accept the cheque.

More information

• NZ Bankers' Association 
   
• The Banking Ombudsman

Report by Marc Wendelborn