Science Fair Project Encyclopedia
Check kiting is any sort of fraud that involves drawing out money from one bank account that does not have sufficient funds to cover the check. Most check kiting schemes are achieved with the use of two bank accounts.
Check kiters typically write a check on one account, then deposit in their second bank account. Just before the check is submitted to the first bank for payment, the kiter then deposits a check written off the second bank account, which also has insufficient funds. This is possible due to the delay created by the collection of funds by one bank from the other (known as float time ), which creates an artificial balance. In accounts with interest that compounds frequently, this can provide a significant amount of profit for interest over time on top of other funds.
However, with the advent of electronic checks , float time is being significantly reduced, because banks are no longer required to mail paper checks from one institution to another.
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