How to Avoid Overpayment Scams

Last post: Dec 6, 2019

Scammers and their methods get more advanced every year. There are some scams, however, that will never die and should be easy to spot, like the infamous Nigerian Prince scam. Overpayment scams are relatively easy to spot and to avoid, but they have advanced over time. This scam targets businesses rather than the individual - and whether you’re a small independent online retailer or huge corporation, you could be at risk.

What is an overpayment scam? 

The scammers work by making an offer for your services or for a product, and then making payment (usually by pre-paid card, wire transfer or cheque) amounting to a greater sum than the agreed upon price. This money won't actually clear in the victim's account; it will be from a stolen credit card, preloaded card with no funds, or uncleared cheque.

The scammer then contacts the victim with an apology - they might make the excuse that the extra money is to cover customs, shipping, or agents fees, or they may simply say it was a mistake. They will ask for a refund of the excess via wire transfer, pre-loaded card, credit card or online bank transfer. If the victim refunds the money, the scammer will then disappear and the money they originally paid won't clear into the victim's account. 

The evolution of the overpayment scam

We had reports here at Choice of a business called Al Kazeem Trading based out of Dubai trying to catch victims out with an overpayment scam back in 2017. Essentially, the scam was a typical overpayment scam, from a company that seemed legitimate. They paid with an uncleared bank transfer and sent an amount much larger than the agreed upon amount, which was already substantial. The scammer then made contact with the victim again to apologise for their error, and pressured the victim by saying that the error could cost them their job if the excess money was not returned before a superior found out. 

Reports have continued to crop up of companies with the same strategy and business names that are very similar. Whilst this particular scammer continues to use the same methods (probably with a worrying amount of success) this type of scam has evolved as payment methods and websites have become more secure. Some online retailers have reported scammers pretending to have made a payment for a larger-than-asked-for amount by providing a fake paypal receipt. The scammer will then claim that paypal is holding the money until the seller sorts out the mistake on their end. 

How to avoid being scammed

Legitimate customers should not have too much of an issue waiting for the money or aiding the business in ensuring everything is secure, especially if you explain that it is for the security of your business. 

It's good practice to wait until payments have cleared before sending items or performing services. If a payment is being held and is not clearing in your account, check with either your bank or the company holding the money. It's rare for financial service providers to withhold payments. It could be for a valid reason, or it could be because the money is either from a card that has been reported stolen or a card/cheque with no funds behind it. 

In order to be cautious, if the money is received from a credit card and it does clear your account, the money should only be paid back onto the same card - not via wire transfer etcetera, as it's possible the scammer has stolen the card details.  If you receive a cheque for an amount in excess of the agreed price, it should be returned to sender with a request for a replacement cheque for the correct amount of money. The cheque should not be paid in and then refunded. If the cheque is paid in by mistake, wait for it to clear or seek help from your bank before any refunds are granted.

Small independent retail site owners or those with accounts on sites like Etsy or Depop are most at risk from overpayment scams, but every business based in sales should take care not to accept payment methods such as wire transfers, electric currency transfers (like bitcoin) pre-loaded cards or international fund transfers. Establish reliable and secure methods of payment like paypal, cash, or secure bank transfers. Being cautious should be enough to avoid scams like these. 

At Choice Business Loans, we care about businesses and their finances. We know how hard you work for the money you make, and how devastating it can be to lose it. That's why we want to educate businesses both large and small on the threat of scams and how they can safeguard themselves. Business fraud is becoming more and more sophisticated, so it's really important to be aware and up to date on all the latest scams and how they work.

We deal with a wide range of lenders and specialist brokers and have the knowledge and experience to examine different finance options and make suggestions to suit our clients. We can look at anything from a traditional bank loan, to Crowdfunding, Fintech lending, Merchant Cash Advances and similar innovative options.

Drop us an email at or call us on 01494 410 125 to speak with one of our team about what kind of help we can offer you.