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5 Common Financial Scams to Look Out For

5 Common Financial Scams to Look Out For
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Anyone, at any time, can become a victim of financial fraud. No matter how cautious you are, criminals are constantly looking for and inventing new ways to take money from honest, hardworking individuals. It is a terrible fact that there are criminals out there whose sole purpose is to defraud you of your hard-earned money. However, remaining aware of common financial scams and fraud tactics can help save your finances in the future.

Recognizing Financial Scams

Fraudsters generally prey on seniors and college students, but all consumers are vulnerable to fraud. In 2020, the Federal Trade Commission received more than 2.1 million consumer fraud reports, with victims losing an estimated $3.3 billion. Scammers employ a variety of techniques to deceive consumers into disclosing sensitive information such as bank account numbers and passwords.

The government and fraud specialists are working hard to put an end to financial fraud and cybercrime. However, fraudsters are developing new and better methods of defrauding individuals. There is a lot you can do on your own. 

Here’s how to spot a scam and put an end to it before it starts:

  • Unwanted phone calls promising unrealistic services
  • Fake emails providing services that appear to be too good to be true
  • A respectable company will never request your Personal Identification by PIN or password.
  • Don’t give in if someone puts you under time constraints. It’s most likely a ruse.
  • Have faith in your instincts. If you don’t recall entering a competition, you didn’t.

Common Scams:

1. Internet and Text Message Phishing Scams

Scams on the internet, in general, are on the rise. Hackers send an email or text message containing a virus or spyware to steal your sensitive information. Some attempts are quite clear, but others look to come from a reliable source and may even include a bogus Zoom invitation. 

The majority of scams rely on you clicking on a link to download a file or providing log-in information, such as changing an “expired password.” They may also come in the form of a bank or financial lender. For example, if you are looking for an online payday loan lender, be sure you are speaking with credible lenders. Click here to learn more about reputable online payday loans.

2. Prize Scams

Scammers frequently notify you that you have “won a reward,” such as a lottery, sweepstakes, or contest and that you must supply personal information or pay a fee to claim your winnings. Alternatively, the scammer may want personal information or a charge only to gain access. They will also frequently put you under pressure to respond swiftly or risk losing your prize. Many additional surprisingly cunning ways are used in the setup.

You should always avoid unsolicited mailings, communications, and notifications. Investigate the firm and the sweepstakes or contest. You will not be charged any fees to claim your prizes. Also, never give out vital information.

3. Government Agency Imposter Scam

A caller, automated message, email, or letter purporting to be from Social Security, the IRS, or another government agency informs you that you have been the victim of identity theft, that you are entitled to a stimulus benefit or government grant award, or that you owe income taxes. The caller may refer to a valid Social Security or IRS field office address, and the caller ID may be modified to display an official Social Security, IRS, or other government phone number. If you are unsure, it is advisable to hang up and call Social Security or a government agency directly.

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4. Debtor Scams

It is not unusual for legitimate debt collectors to contact you in order to collect on the obligations you owe. However, you may come across scammers posing as debt collectors, attempting to obtain your personal information, or demanding payment for debts you feel you owe. It could even come in the form of a fake medical or student loan bill.

It could also look like a bill for a payment you owe or one you’ve already made. The fraudster may even masquerade as a debt settlement company, claiming to be able to settle or restructure your debt. To avoid being a victim of this type of fraud, always confirm the debt and debt collection company details before supplying any personal financial information. Request an official verification letter from the company whenever in any doubt.

5. Investment Scams

Another method scam artists prey on people looking for genuine ways to gain money is by offering excessively unrealistic returns on investment. Pyramid or Ponzi schemes are common financial scams that attract victims with overstated income possibilities by recruiting more members. In situations like this, the scammers use money from new recruits to fund the operation. Using high-pressure sales tactics to market real estate or other high-dollar unproven investment prospects is another example of investment fraud.

When it comes to investment, if it sounds too good to be true, it probably is. If it asks you to put more money at risk than you can reasonably afford, it’s usually not a good idea. Ask questions, get everything in writing, don’t make rash decisions in the heat of the moment, and look under every rock to examine both the opportunity and the investment professional who is giving it. Consult your state’s securities regulator and the Financial Industry Regulatory Authority.

Further protect yourself against scams by using tactics like:

  • Avoid any unwanted or haphazard phone calls, text messages, emails, or letters. Even strangers will knock on your door.
  • Never give out your personal information to anyone.
  • Keep your antivirus software up to date, and remember to delete your cache and cookies regularly. Allow your browser to save your payment information.
  • Use strong, difficult-to-guess passwords across all platforms. Personal information, such as your date of birth, should not be used in your passwords.
  • Never pay in advance for any service unless you are assured of the company’s genuineness.
  • Avoid making payments or entering passwords when using a public WiFi network.
  • Look for an SSL certificate on the websites you visit.

Always Stay Aware

Scams can take many various forms and are becoming more sophisticated, so it is critical to stay alert and protect yourself from becoming a victim. Being the victim of a scam or fraud can be upsetting. It can cause feelings of worry, despair, and rage. However, taking precautions can save you from becoming a victim of financial fraud.

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