Wealth Management

Americans lost a shocking $905 million to financial scams in 2017—and that number only includes the scams reported to the Federal Trade Commission. It’s critical for people to understand the warnings signs of fraud to avoid having their money stolen.

3 Methods to Avoid Financial Scams

1. Don’t Give Out Financial Information

One of the most common financial scams, known as phishing, occurs when a thief contacts someone in the disguise of a legitimate institution, such as the IRS or the bank. This might happen over the phone, through the mail or through email.

Scammers will often tell their victim that they owe more money on their taxes or that their bank account has been compromised. This introduces an element of fear that causes the victim to panic and act irrationally. Finally, the thief asks the victim for their credit card number, Social Security number or other financial information.

Legitimate organizations will almost never ask for financial information over the phone, through the mail or through email. They typically already have it on file.

financial scams

2. Never Click Suspicious Email Links

While some fraudulent emails request that people reply with financial information, others direct their victims to a malicious link.

An example is an email that appears to be from a bank, alerting the victim that a charge was made in a foreign country. The email requests that the victim click a link to view their account and reconcile the charge. However, the link leads to a fake version of the bank’s website. After the victim enters their username and password, the scammer can use it to access the victim’s actual bank account.

The best way to avoid this scam is to double-check every link and email to make sure that it’s truly from a legitimate institution. Fraudulent emails often have misspellings or fail to list contact information. It’s also useful to call the institution and request more information to confirm whether it’s real or not.

financial scams

3. Avoid Fake Retailers

As the holidays approach, fraudulent retail websites become more common. They appear to look like legitimate websites, but sell counterfeit goods for steep prices or, occasionally, shut down completely after a victim makes a purchase.

These tips help to avoid online retail financial scams:

  • Look for a suspicious domain name. For example, the URL for Louis Vuitton’s website is louisvuittion.com. A fake website might even have a URL like louisvuittonusa.com.
  • Watch for poor presentation. Legitimate retailers have functional, presentable websites. Fraudulent websites often have low-quality photos and are littered with numerous spelling errors.
  • Avoid sites with shady contact information. International contact numbers and customer service emails with odd domains are huge red flags of fraud.

These tips can be used by anyone to recognize and avoid common financial scams. Fraudulent activity can be reported to the government by using this guide.

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