12 Popular Financial Scams You Need to Know
Scams are nothing new, but the digital age has given thieves virtually unlimited ways to separate you from your cash or sensitive financial information.
And these scams are not going away anytime soon.
According to First Orion, a provider of phone call and data transparency solutions, mobile phone scams are on an alarming path. First Orion’s research shows 3.7 percent of all mobile phone calls in 2017 were scams. This number skyrocketed to 29.2 percent in 2018, and First Orion projects it to rise to 44.6 percent of all mobile phone calls by early 2019.
The phone isn’t the only place scammers are trying to pull one over on you. Internet scams are up big time, too. According to the Better Business Bureau’s Scam Tracker, reported internet scams rose 99.3 percent to 44,866 cases in 2017. They’re on the rise again in 2018.
With these and other scams bombarding us, we must be prepared to dodge them. Here’s a rundown of 12 common scams the Federal Trade Commission warns consumers about and how to avoid being a victim.
The Gift Card Scam
A relatively new scam in the ever-expanding realm of money grabbers is the gift-card grab. These scammers call you with what seems like something urgent, like an overdue bill or a huge lump sum of cash with your name on it, but they have a weird request: The only way they can release your prize or wipe out the debt is by you paying the overdue balance or “prize-release fees” with a gift card.
These scammers often ask for an iTunes card — I guess they’re Apple fans — but they’re sometimes good with whatever card you can get.
They will ask you to buy a card for a fixed amount and call them back with the card numbers and other details. Once they have this number, they can buy goods on your dime.
Why do these scammers love gift cards? It’s simple. They’re just like cash, and you rarely can reclaim cash you lost through a scam. Plus, it’s virtually impossible to trace a gift card. With a credit card, there will be a record of where the scammer used it, and you can file a fraud complaint and have the card issuer freeze it.
Scammers have targeted me countless times with this attempt the drain a few bucks from my bank account. They often claim to be part of the IRS or FBI, but the Federal Trade Commission reports scammers claiming to be with a utilities company, prize officials, a member of the military selling something before deployment or a lottery official.
If you’ve fallen victim to this scam, report it to the FTC and call the company that issued the gift card to report its use in a scam.
The Medicare Card Scam
Recently, Medicare announced it would send new cards to recipients that included a new number in place of the beneficiary’s Social Security number. The problem: Scammers used this news to create a new scam.
Some medicare scammers are subtle and will call just to verify — read: steal — your personal information, like Social Security number, address, banking information and more so they can send you a new card. After you give up this info, though, no new card arrives.
Others scammers are more direct and call to tell you there is a fee for the new medicare card. Once you send these scammers your cash, you are out the money and never get the supposed new card. Another version of this scam offers to replace the flimsy paper cards with plastic ones for a fee.
These are all scams that will either drain your hard-earned money or end in identity theft. The FTC recommends never giving personal information to anyone who claims to be from Medicare because this department will never call asking for any personal info. Also, medicare cards are 100 percent free, so Medicare will never ask you to pay a fee for one.
If you’ve fallen victim to any of these scams, contact your financial institutions to alert them of potential fraud and put freezes on your credit.
The Scam Targeting Used Car Sellers
Selling a used car can be frustrating and time consuming as you’re stuck dealing with countless tire kickers and no-shows, so it is easy to get excited when a serious buyer pops up. Scammers use this emotion to steal your money and information.
These fake buyers show serious interest in the car via a phone call or text but need a vehicle history report first. That seems fair enough, right? The problem is the scammer will send the seller to a website that seems legit because the URL ends in “.vin,” but it is a fake site designed to steal your money and credit card information.
You’re none the wiser because the site provides you with a report you can send to the supposed buyer. But after you send the buyer that glowing vehicle history report, he or she ghosts you. The buyer was nothing more than a scammer looking to use your desire to sell your car against you.
To avoid this issue, the FTC recommends using only official sites to get vehicle history, like the National Motor Vehicle Title Information System.
The Utilities Cutoff Scam
Our busy lives sometimes get the best of us, which can result in bills going unpaid. Many times it is that past-due call or letter in the mail that reminds you to send a payment. Scammers have found this moment of panic is a great time to skim a little cash.
Scammers will call posing as the utility company and threaten to cut off your power or water unless you pony up dough. Oftentimes, they will combine this with the gift card scam above to prevent getting caught in the act. This request for an alternative payment is a telltale sign you’re dealing with a scammer.
Of course, you don’t want your utilities turned off, but you swear you paid it. The best bet, according to the FTC, is to hang up without giving the caller any payment information. If you are still concerned you have an outstanding bill, call the utility company directly to see if you are behind.
The Gas-Pump Skimmer Scam
While this scam may not involve a phone or the internet, it’s a classic that remains popular. If scammers had a greatest hits album, the old gas-pump skimmer would be the feature jam.
One of the least secure places you use your credit card is the gas pump. Not only do you enter your billing ZIP code or PIN in front of the entire gas station, but those pumps are often left wide open to tampering.
Scammers see this as a prime opportunity to grab your cash by attaching credit card skimmers to the card reader at the gas pump. This skimmer stores your credit card information for the scammer to use later.
So, what about your PIN or billing ZIP code? The scammer can’t use your card without that, right? Sure, but scammers are a savvy bunch. They will either post up in a spot where they have a clear view of the pump’s keypad, or they will install a small camera inside the pump and record you entering the PIN or ZIP code via a small hole they drilled above the keypad.
There are a few ways to spot a skimmer and foil the scammer’s attempt. First, look for tamper-evident tape on near the card reader. This tape will display the words “Void” if someone removed the tape and fiddled with the pump’s guts. You can also compare the card reader on your pump to the others at that station. If it looks longer or different in any other way, try a different pump. Finally, you can also give the card reader a wiggle — if it feels loose, a scammer may have messed with it.
If you aren’t sure or just have a bad feeling about using your card at the pump, you can always prepay inside the gas station.
The You’re in Big Trouble Scam
Scammers love playing on emotions, and what better way to turn you into an emotional wreck than claiming to be an official government agent threatening you with jail time or a lawsuit if you hand over some cash? This is exactly what they are doing.
Scammers will call, text or even email you claiming to be from the IRS, FBI or U.S. Marshall. The scammer will claim you owe money for back taxes, missed jury duty or some other random act, and officials will arrest or sue you if you don’t pay up now. To make these threats seem more official, scammers will mask their phone numbers ones that have Washington, D.C. area codes. Sounds scary, right?
In reality, the IRS, FBI or U.S. Marshall will not and cannot call you to demand immediate payment. If it was that urgent, you’d receive an official letter in the mail or a friendly meet-and-greet with a badge. And about that area code: It is easy for scammers to mask their phone numbers with others.
If you fall victim to one of these popular scams, immediately report it to the FTC and alert your financial institution.
The Unclaimed Money Scam
Another big-time scam that seems to hit my email inbox almost every day is the famed unclaimed money scam. The email generally comes from a scammer claiming to be from the FBI or U.S. Treasury and tries to convince you there are millions of unclaimed dollars just sitting there with your name on it. To give you the added incentive to contact them, they will tell you If you don’t claim the funds — and pay a small processing fee — they may charge you with money laundering.
Gasp! You’d better contact them and settle this up now, right? I mean it’s millions of dollars that is somehow in your name — and you risk catching a fraud charge if you don’t claim it. The thing is, the second you contact the “agent,” he or she will try to get your sensitive personal information or steal your money through a fraudulent transfer or the infamous gift card scam.
See that big “delete” button in your email account? Use it liberally with these scams. The FBI will never email you, nor will it attempt to contact you about millions of bucks just chilling out in the office.
The Friend-in-Need Scam
Scammers know pulling at your heartstrings is a great way to separate you from your cash, so they use loved ones to convince you to send money. These scammers will reach out via phone, text, email or even Facebook claiming a loved one is in danger and only a healthy dose of cash will fix the issue.
These scammers will claim to be a police officer, lawyer or even your loved one to make the scam sound more legit. They’ll request an overnighted check, a wire transfer or a gift card to fix the problem. They want these types of payments so there is no time to fact-check their claims and put a stop on the payment.
The FTC says they will also ask you to keep quiet about the situation so others don’t find out about your relative’s issues. In reality, the scammer just doesn’t want the relative in question or any other family member exposing this as a scam.
If you fell victim to this scam, call the financial institution you used to pay — your bank, the gift card company or the credit card company — and let it know about the fraud. After that, report the scam to the FTC.
The Rental Home Scam
The rental-home market is scalding hot in some areas, pushing scammers to target these markets with creative money-snatching schemes. These scammers don't own the rental properties in question. Instead, they will either grab all the information from a legitimate rental property and put it on another site with an unrealistic price or hijack the landlord’s account and drop the rental price ridiculously low. They use this low price to draw in as many potential victims as possible.
When you reach out about the property, everything may seem legit because there's often a creative backstory that seems too well-crafted to be a scam. The scammer may also use the owner’s real name just in case savvy researchers look up the property’s ownership history.
In the end, the scammer cannot meet you for one reason or another and will ask you to send the deposit via a wire transfer or Western Union. The scammer will promise the house sitter will meet you at the home with the keys and lease once your payment arrives. Sadly, after you send the moolah, you’ll learn the scammer doesn’t own the house and the house sitter doesn’t exist.
I ran into this exact scam when I moved to Vermont in 2015. I was so frustrated to find out it was a scam because the house was gorgeous and super-cheap. The tricky scammer even used the owner’s real name in all emails. Luckily, I put the pieces together before sending money.
If you’re not as lucky as me and fell victim to this scam, contact the company you sent the money through and report the scam to the FTC.
The Curse of the Pyramid (Scheme) Scam
Starting a side-hustle is so satisfying and can help you meet your financial goals. Sadly, the promise of riches also exposes you to an age-old scam called a pyramid scheme. These schemes often come in the form of multilevel marketing businesses, which are businesses where you sell products directly to customers via word of mouth.
While many multilevel marketing businesses are legitimate, some are pyramid schemes that set you up to fail. Legit multilevel marketing companies and pyramid schemes may look the same on the surface, the devil’s in the details.
In a pyramid scheme, the company compensates you more for recruiting new resellers than it does for selling products to the public. Sure, it’s common for multilevel marketing companies to pay you for bringing in new resellers, but most of your compensation should come from selling to customers.
Also, any company that pushes you to sign a contract and pay money to sign up during an “opportunity meeting” is likely a pyramid scheme. These companies design “opportunity meetings” to get you pumped about earning thousands of dollars and convince you to sign up before doing any research.
Avoid this costly impulse buy and collect all the contract information, potential expenses, commission scales, and any other information needed to help you make an educated decision. Take this information home and read it over before signing up and paying for anything. If the recruiter won’t give you anything more than a sales pamphlet or claims this is a one-time offer, walk away.
At the end of the day, most pyramid schemes earn the main recruiter tons of cash while you lose your entire investment.
The Mystery Shopper Scam
The gig economy has brought in many quick-cash side hustles like mystery shopping. Scammers use the gig economy to their advantage by tricking wannabe mystery shoppers out of their money with nothing in return. These tricksters list available mystery-shopping gigs that pay insane amounts — we’re talking hundreds of dollars in cash and goods per shop — and are coincidentally hiring in your area.
Once you register your interest in this side hustle online, the mystery-shopping company gives you wild requirements to work with it. The FTC says these requirements include paying to become a “certified mystery shopper,” paying to receive the list of mystery shops in your area and more. The golden rule is if you have to pay for work, it’s a scam.
There are dozens of legit mystery-shopping companies online. I’ve done tons of them. Sure, the pay was super-low at about $3 to $10 per shop plus the cost of the items you bought, but I never paid an unreimbursed penny to do it.
If you’ve fallen victim to one of these mystery-shopping scams, file a complaint with the FTC.
The Social Security Suspension Scam
Scammers will go so far as to say your main identifying number — your Social Security number — has been “suspended” due to some involvement with a criminal activity. The only way to lift the suspension is to pay a fine or confirm identifying information.
This all seems legit because the scammer called from a Washington, D.C. number, has an official title and seems to be out to help you. Well, that’s all a ploy to gain your trust.
Once these scammers get your information, they can steal your identity and cash. You can easily prevent this situation by remembering one fact: Your Social Security number cannot be suspended. It’s just not possible. And even if it was possible, the FTC says the government will not call you to settle up on a criminal issue. The U.S. government prefers sending letters in the mail or stopping by your home for an official visit.
If you are panicking about possible criminal issues under your name, contact the government agency directly to see if you are in any real trouble. Chances are, the agency will be just as confused as you are.