How to Stay Safe From Financial Scams
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One of the biggest mistakes you can make when it comes to protecting yourself from financial scams is thinking you’re too smart to be duped by one.
But according to a new survey conducted online by The Harris Poll on behalf of NerdWallet, 54% of Americans say at least one financial scam has been attempted against them in the past two years, and 18% lost money in a financial scam in the last two years. Americans who lost money to financial scams over the past two years typically lost $325 (median), while about one-third (32%) lost $1,000 or more, the survey found.
“We’re all vulnerable — we can all fall for a scam given the right set of circumstances,” says Eva Velasquez, president and CEO of the Identity Theft Resource Center, a nonprofit organization that provides advice and assistance related to identity theft. Keeping yourself safe starts with accepting that fact, she adds.
“You look at the profiles of victims who filed complaints and it runs the gamut from highly educated, high-income people all the way down to the most vulnerable people in our population,” says John Breyault, vice president of public policy, telecommunications and fraud at the National Consumers League, a nonprofit advocacy group that speaks out about consumer concerns.
While there isn’t a “foolproof solution to stay safe from all scams,” as Breyault puts it, there are strategies you can employ to reduce your risk. Here are four of the most important ones:
Hang up and 'go to the source'
If you're contacted by anyone claiming to be your bank or other familiar company, end the conversation and call the institution’s verified number yourself, Velasquez says. “We always say, ‘If you did not initiate the interaction, then you need to go to the source,’” she adds.
Otherwise, you don’t actually know who’s on the other end of the line, she says, especially because scammers can spoof the number that shows up on your caller ID so it might look legitimate.
In some cases, you might want to pay your bank a visit in person to get clarification. When Thorn Roberts, owner of a small business in Elizabeth, West Virginia, received a payment request he didn’t recognize, he went to his bank to ask about it.
“They knew it was a scam,” he says. As a result, he immediately canceled his accounts and created new ones. Thanks to his quick action and the bank’s help, his money was safe.
Secure and monitor your accounts
Basic online security practices can also help protect you, Velasquez says. She recommends enabling multifactor authentication on your financial accounts, creating unique passwords and not sharing personal details such as your birthdate online.
Jason Zirkle, training director at the Association of Certified Fraud Examiners and former fraud analyst with law enforcement, suggests checking your financial accounts at least once a week and investigating any unidentified charges immediately. Even one small erroneous charge could suggest someone has access to your account, signaling the beginning of a larger problem.
Get familiar with common scams
The Federal Trade Commission reports that the top scams of 2023 include impersonating business and government institutions, online shopping issues and phony sweepstakes.
“You don’t have to become an expert in each one, but you need to understand the hallmarks of most scams: They contact you first, dangle some sort of bait in front of you and create a sense of urgency,” Zirkle says. Then, they ask for either money or personal information, which they use to access your money.
Here are some common scams to be aware of.
Imposter scams
Imposter scams occur when people pretend to be someone they're not to gain your trust and steal personal information or money. Common ploys include posing as a government official, charity or other trustworthy organization.
Other imposter scams include pretending to be a family member, such as a grandchild calling a grandparent in distress and begging for money to get out of a faux situation. Alarm and urgency are used to get you to hand over money quickly.
Mobile payment scams
Mobile payment platforms like Venmo, PayPal and Zelle are common tools for sending and receiving money using a smartphone. But scammers have also found ways to tap into the platforms to steal your money. Fraudsters can pretend to be a loved one in need of help and ask you to send money, sell you an item they never intend on sending, or claim you have won a prize and you must send payment to receive it.
Job scams
Searching for a new job? Be alert to employment scams, which live in some of the most frequented online job search databases like LinkedIn. The scammer impersonates a recruiter from a well-known and often large company (hoping that a big name will fool you with instant credibility). You may even go through multiple interviews before being sent a job offer.
The impersonator is after your financial details — Social Security number, bank accounts, driver’s license — to commit identity theft. They may even schedule an onboarding meeting to ask for personal information under the guise of completing tax paperwork. If you're suspicious, call the company using a number you look up (not one provided to you by the recruiter) to verify you're a candidate or that the job exists.
Romance scams
Preying on victims’ vulnerability, romance scammers trick consumers into falling in love with them only to ask for money or access to financial information. These scams can sometimes span months as the fraudster works hard to build trust before making a loan request. While it can be a laborious process for scammers, it's lucrative. According to the FTC's Consumer Sentinel Network, roughly 64,000 people reported romance scams in 2023, with losses totaling $1.1 billion.
Debt scams
Legitimate debt collection agencies routinely contact consumers to collect debt in legal ways. However, people with ill intent can impersonate collectors and pressure you to repay a false debt or make you think you’re paying off a real debt when a scammer is actually pocketing the money.
Likewise, be wary when exploring debt settlement, especially if a company promises guaranteed results or asks you to pay upfront.
Student loan scams
Debt scams also exist for student loans. Some debt collection agencies may make big promises to settle your debt, but be concerned if they ask for payment upfront, say they can provide immediate debt relief or insist you share personal data.
Social Security scams
Your Social Security number is the cornerstone of personal identification so it only makes sense that identity thieves would target it. If you get a call saying your Social Security number or benefits have been suspended or that you owe money, be leery; it could be a scam.
The Social Security Administration lists a helpful set of “P’s” to remember: pretend, problem, prize, pressure and pay. A scammer will pretend to be from a Social Security office and may even use a real employee’s name. He or she may say there’s a problem with your account or you’ve won a prize. The scammer pressures you to take quick action and to pay in a specific way.
Medicare scams
Just like a Social Security number, Medicare numbers can be used by identity thieves to make fraudulent claims for things like prescription drugs and health care services. Fraudsters often contact consumers by phone and claim to be with Medicare. If you are told you need to switch your account, are due a refund, have received free items and services, or are in line for an upgrade, odds are good it’s a scam.
Tax scams
Criminals prey on people’s fears of trouble with the IRS, often posing as an agent or collector, and asking for payment. Note that the IRS always initiates contact via U.S. postal mail; a sure sign of a tax scam is learning of a “problem” through a call, text, email or social media message.
Investment scams
If an investment opportunity claims you’ll make quick money with no risk, you may be facing an investment scam. Also watch out for offers of free initial training on topics like real estate, cryptocurrency and precious metals; you may then be lured into paying expensive fees to continue and the information may be basic or without actual value.
Report scams and be your own advocate
Reporting fraud to government agencies and private organizations allows for better fraud tracking. While there's no centralized source for fraud tracking, you have several choices for reporting a scam. You may report directly to the Federal Trade Commission, your state attorney general’s office, the FBI, your local police station, your bank’s fraud department, the Better Business Bureau’s Scam Tracker and the Identity Theft Resource Center, among others.
The FTC takes scam and identity theft reports over the phone or online in multiple languages including Spanish, Mandarin, Tagalog, Vietnamese, French, Arabic, Korean, Russian, Portuguese and Polish. It also offers consumer education in a variety of languages.
Most people who lose money to scams never see it again, but Zirkle suggests “being your own advocate” with your bank and police. In some cases, your financial institution or law enforcement might be able to help you recover some or all of it.
This article was written by NerdWallet and was originally published by The Associated Press.
