WHAT HAPPENED?! It’s not just stupidity. The ‘Chase Bank glitch’ is indicative of a wider problem: financial illiteracy.

Last week, a new trend emerged on TikTok. No, it wasn’t brat, it wasn’t demure, or even particularly mindful. The new phenomenon taking over the platform was check fraud.

Yes, you heard that right.

Sugar-coated as the “Chase Bank glitch,” TikTokers were hopping online to reveal a so-called “money hack.” The scam encouraged account holders to deposit faulty checks into their Chase accounts, allowing them to withdraw the cash before the bank could flag the funds as illegitimate. For some, this even worked for bank loan applications.

While Chase Bank is yet to reveal the damage, TikTok suggests thousands of people have participated. The platform quickly filled with videos of people gloating, smiling, and fist-pumping in celebration of their illicit gains. More concerningly, many encouraged others to also take advantage of what they genuinely thought was an innocent “money hack.”

How could Chase let this happen?

In the US, it’s a legal banking requirement to make some of the check’s total funds available immediately after depositing—before the check itself is cleared. For many banks, NBC notes that this process takes one or two days. For Chase, though, the procedure was happening almost instantly.

In other words, Chase’s vulnerability came from a legal mandate, and it was this loophole that people decided to exploit.

When did things go wrong?

It didn’t take long for other TikTokers to jump in and point out that what was happening wasn’t legal at all. The rhetoric that had once framed the trend as a “glitch in the matrix,” as though we were all living in some gamified reality, quickly shifted to words like “felony.”

Chase, which also happens to be the largest bank in America, soon issued a statement. The multi-trillion-dollar conglomerate went on record saying, “It’s fraud, plain and simple.”

Check fraud can be classified as either a misdemeanor or a felony, depending on the amount of money withdrawn. Legally in the US, any amount stolen over $2,000 is considered a Class D felony. So, you can only imagine the shock of many who had recently boasted online about fleecing Chase Bank for $30,000.

Since Chase’s rectification, many trend participants now have massive negative balances in their accounts. And as if no lesson had been learned, many took to TikTok once again, this time to cry and seek sympathy from the millions of viewers who watched their downfall.

While rumours suggest legal action and arrests are already underway, this information remains unconfirmed. What we do know is that the ramifications are likely to be both massive and far-reaching.

Why did people think this was okay?

As outsiders, it’s easy to jump online and label those who participated as moronically stupid. And maybe they are. But what’s more concerning is the sheer number of people who joined in on this scam. Arguably, this speaks to a much broader issue: why people followed this advice in the first place.

Some might initially point to the state of the US economy. Perhaps this phenomenon reflects a level of desperation only found during times of economic hardship—people knew this was illegal, but their financial struggles made them care less.

However, while the US economy faces its own challenges, that doesn’t seem to be the case here. Unemployment is sitting at a relative low of 4.2%, inflation marginally dropped to 2.9% in July, and the economy grew 3% in the second quarter of the year. Looking at these key indicators, the US economy appears relatively healthy.

In other words, this isn’t recession-core behaviour—because there is no recession.

Is financial illiteracy the root of the problem?

A more likely explanation lies in America’s financial literacy (or lack thereof). The P-Fin Index, a 28-question measure of personal finance knowledge, is widely recognised as an effective way of assessing financial literacy across populations. In the US, the P-Fin index has hovered around 50% for the past eight years. As of 2023, it’s dropped to 48%.

Yes, that means over half of the US population is deemed financially illiterate.

Let’s make things worse, shall we? Of the eight financial realms measured by the P-Fin, “Comprehending Risk” almost always ranks as the lowest across the board. And Gen Z, the demographic dominating TikTok, ranks far worse than their older counterparts. Put two and two together, and it all starts to make sense. It’s no wonder crypto bros, MLM influencers, and every other “financial guru” have exploded on the platform.

To top it off, this financial knowledge gap is compounded by overconfidence. As noted by Professor Lusardi in a Cambridge University paper, it’s often the people who know the least that think they know the most. That doesn’t sound dangerous at all, right?

Sure, we could call on Darwinian Theory to let natural selection run its course. But there’s an important distinction between stupidity and illiteracy. In this case, I suspect the latter is the real culprit. A more effective approach would be to overhaul financial education systems—a problem that likely extends beyond the US.

Maybe Chase Bank should consider investing some of those trillions in education?