In September 2024, some Chase Bank customers discovered a system error that allowed them to deposit bad checks into their accounts and then withdraw funds they didn’t necessarily have. These customers gleefully broadcasted the error on TikTok and X, claiming that the “Chase glitch” they uncovered was an “infinite money hack” for getting free cash.
That’s not how banks work.
Who Pays for Bank Mistakes?
“Banks often release funds before the check officially clears to maintain a smooth customer experience. However, this is a provisional credit that the bank can withdraw if the check bounces,” says Jonathan Feniak, General Counsel at LLC Attorney.
In this case, the system gave access to a lot more money than it normally would have. And the “glitchers” didn’t understand that it’s not legal to capitalize on a bank system error. Eventually, the bank (and law enforcement) made it clear that free lunches (except possibly in jail) would not be forthcoming.
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What Does Bank Error in Your Favor Mean?
Anyone who played Monopoly with their grandparents probably remembers the “bank error in your favor” card, which entitles you to $200. Typically, a bank error in your favor means your account balance is larger than it should be.
Bank errors are more likely to result from teller-aided transactions, because employees can make mistakes when typing account numbers or inputting large amounts. A deposit meant for someone else’s account can end up in yours. Or your withdrawal might come from another depositor’s savings. Or the amount might be wrong; if, for instance, a teller types an extra zero (so a $1,000 deposit becomes a $10,000 deposit).
When Do You Get to Keep Money From a Bank Error?
Monopoly isn’t real life. The bad news (for you) is that you never get to keep money that isn’t yours, no matter who messed up and put it in your account. And if you think about it; that’s fair. Because extra money in your account probably means missing money from someone else’s.
“If funds are mistakenly put into your account,” says Mark Pierce, a certified public accountant, attorney and CEO of Wyoming Trust & LLC Attorney, “the law requires you to alert the bank and refrain from spending the money. Using these funds can be construed as theft since that money does not legally belong to you. Banks usually have systems in place to detect and correct these types of errors, but if an individual spends the money before the correction is made, they would be responsible for repaying it.”
What Should You Do if You Find a Bank Error?
If you pop by the ATM for some weekend fun money and find that your balance is $20,000 too high, don’t head to Party Town. Handle an error in your favor the same way you’d handle one that goes against you — by letting the bank know ASAP. Then monitor your account until the error has been corrected.
That’s what you should do. Here’s a list of things you shouldn’t do:
— Don’t take the money out, even if you plan to put it back right away.
— Don’t transfer it to another account, even if it’s at the same bank.
— Don’t invest any of it, even if you expect to return the money.
— Don’t lend it to someone else or use it to help someone else, even if it’s a good cause.
— Don’t assume that deposits you didn’t make yourself or have any knowledge of are yours.
There is only one correct option — inform your bank as soon as you spot an error in your favor. If someone did in fact deposit money into your account on purpose, the bank will sort it out and let you know that the cash is yours. Happy day.
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What if You’ve Already Spent the Money?
It’s a mistake to spend bank error money, even if you didn’t know it was there. And the amount might not seem like such a big deal — not every error is a five-figure windfall. Eventually, however, the money’s rightful owner is likely to make a claim, software will flag a problem or auditors will find misrouted funds.
“As an expungement attorney, I’ve encountered cases where people spent the additional money, either mistakenly or on purpose. Depending on the circumstances, the bank’s response may range from a request for reimbursement to prosecution,” says David Weisselberger, founding partner of the Florida law firm Erase the Case.
Feniak explains that most banks aren’t vindictive.
“If you genuinely didn’t notice the error and subsequently spent the money, the bank would likely work with you to establish a repayment plan, as they typically prefer to settle these matters amicably,” he says.
“However, failure to return the funds or engage with the bank to resolve the matter could lead to more severe consequences. The bank has the right to adjust your account balance to correct the error and, if necessary, could take legal action to recover any outstanding amounts. The most extreme consequences would typically arise only if there was intent to defraud or illegal behavior on the part of the account holder.”
Your bank will probably reverse the transaction. It may put a hold on funds to cover the error. It might freeze your account, and it won’t need your permission to do it. (This is called the “right of offset.”)
A reversal or account freeze could cause checks, transfers or debit card purchases to bounce, causing you to rack up fees and embarrassment.
Julia Lozanov remembers an incident involving a friend.
“I recall a friend’s experience with a bank error that put $5,000 into her account. She initially felt it was a fortuitous break, but quickly grasped the gravity of the issue. She did not tell the bank and ultimately squandered some of the monies. When the bank found the error, it sought the full money returned. My acquaintance was given a month to repay, but there were further implications, such as account termination and a complaint to ChexSystems,” Lozanov says.
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When an Honest Mistake Becomes a Crime
Your bank’s error becomes your crime when you touch money that doesn’t belong to you. Don’t expect anyone to believe your claim of innocence if your balance shoots up and you immediately head to Vegas or the local car dealership.
“If you don’t repay, even if due to a bank error, it can lead to debt collection actions, hits to credit score, and possible legal ramifications,” says Pierce.
If you’re lucky, you might be allowed to repay what you misappropriated. However, if you can’t do that quickly (and possibly even if you can), the bank may file charges so it can get a court order requiring you to repay.
“If you have spent the money,” says Weisselberger, “You must move fast to avoid more issues. Banks may provide a repayment plan, but failure to comply can result in account closure, ChexSystems reporting and even criminal prosecution. My advice? Come honest, and come correct: Tell the bank and work out a solution before things get out of control.”
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