In Need of Easy Explanation for Check Kiting

One definition I've seen is that kiting is the making to oneself of an illegal and unauthorized loan by writing a check on uncollected and often non-existent funds and depositing that check in another account to cover previous similar illegal and unauthorized loans. It's illegal because it is a form of bank fraud. If at any time one of the banks decides not to honor a check on uncollected funds, the kite collapses and the other bank is usually left with an overdrawn account once the dishonored check is charged back. Some kiting schemes have become huge in terms of dollars floating, and involved multiple companies and banks.

First published on BankersOnline.com 6/30/08