How to protect yourself from financial scams in the US?

Financial Scams

Financial scams are nothing new. The first instance of a recorded financial fraud dates back to as early as 300 BC. As per historical records, a Greek merchant was caught while trying to deceive people on the pretext of a comprehensive insurance policy.

Financial fraud takes place when someone loses money or assets through criminal activity or deception. Scams can happen to anyone, at any time, and in different forms. From phone sweepstakes to identity theft, fake debt collection to phishing, online purchase scams to credit card frauds, people are susceptible to various money scams. As per the Financial Trade Commission, one in ten people become victim to a financial scam every year in the US. 

Due to the evolution of technology, fraudsters are employing unexpected methods to reach people. However, you can proactively identify financial frauds and reduce your exposure to money scams by staying informed. 

Listed below are the most common financial scams that you should be aware of, and a few tips to keep your money safe: 

  • Authorized Push Payment Fraud

A bank fraud occurs when someone takes money or assets from a banking institution through deceptive ways. Banking frauds happen in different ways – ATM fraud, demand draft fraud, credit card fraud, and more. As mentioned above, the growth of technology has opened new avenues for fraudsters to carry out money scams

Authorized Push Payment fraud is one of the recent entries in various types of bank fraud; it is abbreviated as APP. In this type of financial crime, fraudsters deceive account holders to send money to a different account through a fictitious invoice that looks legitimate. 

Through phone calls or emails, those involved in the scam collect information from the consumer to create invoices that look original. With the innovative and diverse tactics of fraudsters, the rate of authorized bank fraud is rising at an alarming rate in the US.

  • Investment Scams

Typically, an investment scam is a type of investment that promises high returns with limited financial risk. Millions of Americans fall prey to cold investment calls by scammers every year. As per statistics, the number of investment scams has skyrocketed by 152% in 2019 alone.   

Each scam is different in its offerings when it comes to investment scams. Examples include Ponzi schemes, prime bank schemes, multi-level marketing scams, and advance-fee frauds, to name a few. From wine to art and carbon credits to land, fraudsters develop various exciting offers to attract investors. They may even approach people disguised as representatives from private banks or investment firms.   

  • Social Media Scams 

The advent of social media has given rise to a new set of money scams known as social media scams. With close to 3.5 billion active social media users, scammers abound social media platforms such as Facebook, Instagram, Twitter, WhatsApp, and more. 

In the present world, any personal information is considered as valuable data. There are various techniques employed by social media scammers to grab private information of an individual and initiate scam attacks. Social phishing attacks, romance scams, and clickbait campaigns with attractive offers are some of the many frauds common on social media.   

  • Tax Scams

Taxpayers are the primary targets of tax scams. They often get calls or emails from scammers, disguised as government agents, asking to share sensitive information or social security numbers. Sometimes scammers ask people to make a payment on a tax bill that is fake. They often threaten people with the involvement of law enforcement agencies on payment default. 

Given the rise in tax scams, the Internal Revenue Service (IRS) recently released the annual list of scams under the ‘Dirty Dozen’ to warn against unscrupulous tax return preparers. While phishing is top on the list, it reveals other scams, including but not limited to fake charities, tax refund theft, and impersonator phone calls. 

  • Small Business Scams

More often than not, scammers see a disaster as an opportunity. The COVID-19 pandemic has escalated the cases of small business scams in the US, according to the Federal Trade Commission

From fake emails to dubious links, scammers employ various tactics to deceive small business owners. Mostly, small business owners lack in-depth technical knowledge, which makes them vulnerable to cyberattacks by scammers. Some of the typical remote business scams that popped up recently include loan scams under the pretext of Small Business Administration (SBA), fake donation funds, technological scams, fake unemployment benefit scams, and more. 

How to avoid financial scams 

Financial scams and data breaches are lurking around in every corner. To protect your hard-earned money from cunning fraudsters, you should stay informed and act vigilantly. Read here a few tips to avoid financial scams.  

  • Do not transfer money to a stranger’s account

Be it a Nigerian Prince who would handsomely reward you or the “long-lost cousin” in an emergency, never make a wire transfer online to a stranger’s account. You can hardly reverse or cancel an international money transaction. 

  • Never reveal sensitive financial information to anyone

Many times, scammers reach out to you through text, email, or a phone call to collect account details or other financial information. They may claim as representatives of IRS or other government bodies or even private investment firms. They may even trick you by revealing your social security number or account details. Remember that no bank will ask you for your personal information over the phone or through texts. 

  • Avoid payments in unfamiliar websites  

It’s better to shop online from familiar and trustworthy companies than to put your faith in a fraudulent website. If you are making a payment on a new online shopping site, make sure you check the business’s authenticity. You can visit the Better Business Bureau’s website to check the legitimacy of the company. 

  • Do not donate to fake charities

Never respond to emails or texts asking for charities or donations. If you are interested in charities, make sure you donate to known organizations. You will find a list of official charities on the IRS website. Sometimes financial scammers create fake charity accounts to steal your sensitive financial information. 

  • Never download software from pop-up windows 

Sometimes, pop-up windows on the browser may boldly specify malfunction or virus detection on your computer. Please do not respond to such claims; they may carry malicious softwares and damage your computer’s operating system. 

The bottom-line 

None of us are impervious to financial scams. Anytime scammers may approach you for your account information and scam money from your pocket. All you can do is understand what is a scam, stay informed about the latest ones, and proactively detect any suspicious activity in your account. The tips mentioned above will help you shield yourself from financial scams. 

In case you get exposed to any fraudulent financial activity or money scam, make sure you report the crime to the authorities immediately. Financial scams are usually directed to the Federal Trade Commission, and tax scams are reported to the Treasury Inspector General for Tax Administration.  

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