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What Are Overpayment Scams and How Can You Protect Yourself?

What Are Overpayment Scams and How Can You Protect Yourself?

Jenius Bank Team6/24/2025
A woman with long brown hair and a pensive expression looks at her phone.
Learn about overpayment scams and get tips that could help you avoid them. Many buyers still rely on paper checks to make purchases. Unfortunately, many scammers take advantage of this situation and use fraudulent paper checks in overpayment scams to swindle the seller out of their money.Let’s look at what overpayment scams are and some tips you could use to protect yourself.

Key Takeaways

  • Overpayment scams involve buyers offering more money for goods or services than you request.
  • A scam is considered successful when sellers issue a refund for the difference between the buyer's payment and the seller's asking price for the item.
  • Use caution and only accept certain types of payment for items. This may help reduce the risk of being victimized by check overpayment scams.

What Is an Overpayment Scam?

An overpayment scam, often referred to as a refund scam, is exactly what it sounds like. Crooks intentionally overpay for items or services with a personal check, cashier’s check, or money order. They then contact the seller to request a refund for the difference. This is usually done before the seller has a chance to cash the check or the bank has time to process it. If the scam is successful, the seller issues a refund for the difference in price. The seller then attempts to cash the check only to find that the check is bad. Once this happens, they’re out the money from the refund as well as the items they sold.1While these scams don’t expose you to identity theft risk or put your personal information at risk, they could cost serious cash.

How Overpayment Scams Work

Now that you understand what these scams are, let’s take a quick look at what this might look like in real life.Say a customer is buying a piece of artwork that you priced at $200. The customer gives you a check for $300. They leave with the artwork and contact your business a few hours later after they realize their “mistake.” To maintain a good customer experience, you issue the refund for the amount that they overpaid. But when you deposit the check a few days or a week later, it bounces, or your bank tells you it’s bad. You’re then out the $100 you refunded as well as the artwork, and the fraudster will likely be long gone.

What to Do if You’re a Victim of Overpayment Scams

Unfortunately, there’s typically no easy way to get your items or your money back after falling victim to an overpayment scam. But you should report the incident to your bank immediately. Let them know what happened and give them as much information as possible. They may be able to reverse the transaction and help you recover the money you refunded.You may also want to report the scam to the Federal Trade Commission (FTC). They ask for as many details as possible and use your report to hopefully catch the scammers before they trick others out of their money. You can file your FTC scam report online.You could report the incident to local law enforcement as well.

How to Prevent Overpayment Scams

In 2023 alone, fraudulent activity overall cost businesses and consumers more than $10 billion.2 The more proactive you are in finding ways to prevent fraud, the more money you may be able to keep out of criminal hands (and potentially in your pocket). Overpayment scams present different challenges than other types of scams because of the overpayment and refund components, which creates a window of opportunity for the scammer when using paper. Given the prevalence of electronic payment options, it may be best to forego accepting a check altogether in your transactions. You could choose a payment app or consider accepting credit cards or debit cards too. Most electronic payments show whether a purchase is accepted or declined immediately and may help reduce the opportunity for an over payment “mistake”. Bear in mind that there are other risks and scam opportunities with electronic payments, not to mention potential processing fees. If you must (or want to) accept checks, here are a few tips to help protect yourself from overpayment scams and potentially other check-related fraud as well.3
  • Only accept your asking price: The easiest way to avoid falling victim to a refund scam specifically is to ensure that any check payment is for the exact amount of the purchase.
  • Wait until the check clears to provide a refund: If a mistake is made and a refund is needed, wait until you have the funds in your bank account before you provide the refund. And, if you haven’t deposited the check, return the check to the buyer and request they provide a new one for the correct amount.
  • Only accept checks from people you know: This is pretty simple but may not be practical in all business situations.
  • Verify checks before you give the buyer the item: You could try contacting the bank that issued the check prior to giving the buyer the item.4
  • Wait to give the buyer the item until their check clears: This may be difficult with a buyer you don’t know, since they may not trust you to provide the item. However, this does protect you in the process, because if the check bounces, you still have your product.
Ultimately, perhaps “cash is king” for a reason. If you’re a very small business or engaging in person-to-person sales, and you’re interested in the lowest risk option, asking for the payment in cash may be your best bet.

Final Thoughts

Overpayment scams could be costly for business owners and individuals alike. It’s wise to be aware of the risks and take steps to protect your interests and your bottom line.Though these refund scams are relatively common, they’re far from the only type of scam you need to be aware of. Check out our guide to the top seven financial scams to avoid to learn more.
Fraud & SecurityFinancial Wellness