How to Avoid Overpayment Scams and Refund Bank Scams

admin August 16, 2023
Updated 2023/08/16 at 2:56 PM
How to Avoid Overpayment Scams and Refund Bank Scams

Have you ever been scammed by a buyer? I recently had this experience, where a buyer having gotten the product, he paid for, asked for a refund by sending a request to the credit card company and was refunded directly from them without any consultation from me. Even after I was exonerated, it remains an alarming event that shows just how easily you could lose your hard-earned money through refund theft.

Refund theft and overpayment scams are on the rise. So, you need to learn everything you need to know to avoid fake checks online, refund bank scams, and others.

The activities of scammers are on the increase every year. With their strategies, some scams can be easily detected, while many others are very difficult to detect. Understanding how overpayment scams and refund bank thefts work is highly important especially if you are an e-commerce business owner, freelancer, or solopreneur. These scammers often go after these sets of individuals than businesses.

What is an Overpayment Scam?

This is also known as a cash advance or cash forwarding scam. It is a fraudulent practice where scammers pay for items with a stolen credit card, then ask the seller to send the excess fund to a separate account or to refund the items purchased to a different model of payment.

The History of Overpayment Scam

Sometime in 2017, a commercial organization known as Al Kazeem Trading was targeting some victims for an overpayment scam. Normally the scam was supposed to be executed by a company that looked legitimate. They made payment using an uncleared bank transfer and sent an amount higher than the initially agreed amount. The fraudster then contacted the company and apologized for the mistake of sending a higher amount. They went ahead to pressurize the seller to make a refund or else, the mistake will lead to their being sacked from work if their boss finds out.

Afterward, news began to spread about companies using the same method and names of commercial firms that are familiar. While this fraudster has continued to use the same strategy, the criminal act kept spreading out as means of illegal payment and online platforms began to get secured.

How do overpayment scams work?

It begins with a business interaction between a business and an unknown scammer/ “buyer”:

  • This can be through text or email, where a scammer makes an inquiry about purchasing goods in large quantities, probably for a social event.
  • This offer is usually very attractive, just to entice the seller who would not suspect any red flag. The scammer pays with a stolen credit card.
  • After the transaction is processed, the scammer calls the seller and claims that the transaction would no longer hold and as such there should be a full or partial refund of monies paid.
  • The aim of this scam is to ensure that this refund is transferred to a different credit card or is paid via a cheque. For the fact that the initial payment was done through a stolen credit card, the business will have to pay back with some interest.

Avoiding overpayment scams? Look out for these red flags!

It is therefore quite unfortunate that this overpayment scam makes use of similar names of popular and legitimate websites to siphon upcoming service-based companies, who they believe will get attracted to their supposed ‘juicy’ offer.

Also, these scammers are skillful in the way that they create emotional stories that will make you sympathize with them so you can be forced to go against your usual business policies.

For instance, they can come up with a pitiable story that they have a life-threatening medical condition that requires a lot of money for treatment, and for this reason, they have put up their house for sale.

They can also use other tactics like; if you offer plumbing service, they will say they need money to clear up hospital bills but they need your plumbing service on their project site or they may lose the contract.

So, if your service costs three thousand dollars, they will like to send you four thousand dollars for the job but you should refund the extra one thousand dollars to a different service provider who does not make use of credit cards.

The false claim that they are admitted to the hospital is the reason why they cannot make payment to that service provider and that’s why they cannot physically meet you. They will use a stolen credit card to make the payment of the initial four thousand dollars and the one thousand dollars you sent back will go to the thief’s bank account. So, this is how businesses lose heavily to overpayment scams.

Other critical ways to protect yourself from overpayment scams

  • As a business owner, if you encounter an overpayment situation, do not pay any money back to a customer. You might be involving yourself in money laundering, which is a serious crime. You should know that no legitimate customer would be in a hurry to demand a refund from excess payment for items.
  • In an event, a customer mandates you to send money to a third-party customer because they made an overpayment, kindly decline that request. Rather, send the money back to the channel from where the money was originally paid to you.
  • If you receive a cheque bearing a higher price than the normal price of the item, kindly return the cheque to the sender and request another cheque bearing the exact price of the items they wish to buy. With this, you will not be stuck with sending back money you’ve already received to your account.
  • Take some time to confirm the customer’s identity like customer’s name, phone number, payment information, as well as billing address before you make any payment. If all the information does not correspond with each other, then you have to request more information to verify the order or you can cancel the transaction completely.
  • Be on the alert for customers who come with mouthwatering offers like showing a willingness to pay extra transaction charges. Any customer who is well experienced with credit cards and makes sincere promises to pay any additional fee is a bad sign. There is no reason whatsoever why a customer would have to pay for credit card charges.
  • Use payment gateways that you clearly understand. Stay off any arrangement with any customer that requests an upfront payment through international funds, wire transfer, cryptocurrency, or money order. Most times it is very difficult to get back monies sent through these channels.

Concluding thoughts

With the steady growth of online businesses, there will also be an increased level of scams online such as overpayment scams. But their activities should not scare you because you can protect your business from being a victim of overpayment scams. All you need to do is be diligent about your practices to avoid overpayment scams.

Your watchword should be careful in handling customers’ orders. Remember, do not always be in a rush to process a refund without conducting the necessary checks on a customer’s identity. Also, don’t be easily enticed by some offerings, no matter how legitimate they may look. Good luck.


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