There were approximately 1.7 million fraud complaints in the United States, according to national data from the Federal Trade Commission (FTC). Financial fraud was the most common type of consumer complaint received by the FTC. Financial scams can deprive a person of their savings and often target the most vulnerable, including children and seniors.
Below, we discuss some of the most popular financial scams and ways you can save yourself from falling for them.
Recognizing Financial Scams
One of the best ways to avoid becoming the next victim of a financial scam is to be able to spot one. Here are some of the most popular financial scams:
Bank Fraud
Bank fraud can take on many forms, but central to this crime is the illegal and unauthorized access to another person’s financial account for another’s benefit. Bank fraud may be committed by:
- Stealing checks from mailboxes or out of a person’s purse or wallet
- Phishing emails that steal a person’s credentials
- Account takeover that causes changes to a person’s financial account so that the legitimate owner can no longer access the account
- Stealing account information to make unauthorized wire transfers
Investment Scam
In an investment scam, consumers are often promised a high return for an investment without financial risk. Investment scams can take many forms, including:
- Pyramid schemes like Bernie Madoff’s or Ponzi schemes
- Complex financial products that financial experts may not understand
- Investments that are recommended by financial advisors only to secure a broker fee
- Investments that are recommended by financial advisors that are not suitable for the consumer
- Unmet promises of large returns if you help someone transfer money
Medicare Scam
Because every American citizen or permanent resident is eligible for Medicare once they turn 65, scammers sometimes try to take advantage of this by targeting older adults. They pretend to work for Medicare and contact older adults to get or “confirm” their confidential information.
In some scams, the thief will steal the person’s Medicare information and sell it on the black market to a person who is not currently eligible for the program.
Insurance Scam
In an insurance scam, a person or business approaches a person who has sustained damage that is likely covered by insurance, such as homeowner’s or auto insurance. The person promises to repair the damaged property at a discount. They may get the property owner to sign a contract or make an upfront cash deposit, never to be heard from again. Any work that the supposed contractor completes is often shoddy and will need to be fixed by a real professional, costing you even more money in the process.
Free Pension Review Scam
Some scammers will offer “free” reviews of your current pension or retirement. They may try to get you to sign over your pension benefits in exchange for giving you access to investments with purported high returns. After you cash out your pension and hand the money over to them, the “advisor” may run off with your money or use it to fund a pyramid scheme. Sadly, in many of these scams, victims may lose their entire life savings.
Internet Fraud
Internet fraud extracts consumers’ information by tracking their keystrokes, encouraging consumers to click on phishing emails with compromised links or download attachments, or clicking on pop-up ads that have viruses.
One way to potentially avoid this particular type of financial scam is to use a reverse email lookup tool that lets you plug in a particular email address to determine if it is a legitimate email or simply a trap to try to steal your information.
8 Ways to Protect Yourself from Fraudsters
Fortunately, there are many ways that you can protect yourself from financial scammers, including:
Check Your Statements
Review your financial statements periodically for any fraudulent charges or signs that your account has been infiltrated. Do the same with any investment statements.
Don’t Impulse Buy
As online shopping continues to increase in popularity, so too do the number of fraud cases. Consumers might click on an on-screen ad or pop-up window that appears, often at a reduced cost. They may be so delighted to see the deal that they don’t check to see if the sight is really legitimate. Sometimes scammers may steal consumers’ information or install dangerous malware on their devices.
Use Mobile Banking
With mobile banking, you can avoid someone getting a hold of your physical checks or cards. This can also help cut down on paper documents that fraudsters might use to steal your identity.
Additionally, many banks and financial institutions have apps that can alert you if there is any suspicious activity on your account so that you can immediately restrict fraudulent transactions.
Use Strong Passwords
Use strong passwords that can avoid being guessed by fraudsters or password stuffing. A strong password should consist of:
- At least eight characters
- Upper and lower case letters
- Numbers
- Special characters
Also, periodically change your password and avoid using the same password for multiple accounts to minimize the potential harm if your password is hacked.
Don’t Share Financial Information
Do not share financial information over the phone or Internet, if possible. Especially avoid doing this if you did not initiate the contact.
Make Sure the Websites You Use for Shopping Are Safe
Shopping sites are one of the biggest sources of financial scams because they typically collect all of a person’s information, including their contact details, address, and financial information. Avoid a nefarious site from getting your personal data by only doing business with companies that you are familiar with.
Do a little bit of research if you are using a new site, such as checking if there are any complaints with it. You might also want to check the Better Business Bureau’s website for any complaints.
Don’t Click on Hyperlinks in Emails
Phishing emails and social engineering attacks are some of the biggest culprits behind financial scams today. These communications often contain hyperlinks that have dangerous malware or viruses attached to them so that once you click on them, your device and personal information can be compromised.
Install Antivirus and Spyware Protection
Along with keeping your devices running on the most recent version and updating them with the latest security patches, installing antivirus and spyware protection can help you avoid having a vulnerable system that hackers can infiltrate.
Bottom Line
Today, there are more online threats than ever. However, you can protect yourself by using the eight tips listed above.
