GMR 91: Financial Scams and How to Avoid Them
Episode 91
Technology is wonderful! You can connect with anyone anywhere in the world through your smartphone or computer. Unfortunately, that same wonderful technology can be used against you, to scam you out of your hard-earned money. On this episode of GMR, we explore types of financial scams that you need to be aware of to stay financially protected.
SHOW NOTES
We always emphasize these principles for healthy finances:
Spend on Purpose
Save before you Spend
Increase your financial Margin
Invest Wisely
You can do all these well for a long time and make a lot of progress, then with one mistake, you can end up in a lot of pain.
6 scams that every day people fall for:
Banking Scams
Credit Card and Bank Account Scams
Charity Scams
Pyramid Scams
Investment Scams
Award scams
1. Banking Scams
Overpayment scams - A scam artist sends you a counterfeit check. They tell you to deposit it in your bank account, and wire part of the money back to them. Since the check was fake, you'll have to pay your bank the amount of the check, plus you’ll lose any money you wired.
Unsolicited check fraud - A scammer sends you a check. If you cash it, you may be authorizing the purchase of items or signing up for a loan you didn’t ask for.
Automatic withdrawals - A company sets up an automatic debit from your bank account, as part of a free trial or to collect lottery winnings.
Phishing - You receive an email message that asks you to verify your bank account or debit card number.
Safety Tips
Don’t trust the appearance of checks or money orders. Scammers can make them look legitimate and official.
Contact your bank to report and stop unauthorized automatic withdrawals from your account.
Forward phishing emails to the Federal Trade Commission at spam@uce.gov.
2. Credit Card and Bank Account Scams
You may get emails or calls from someone who claims to be from your credit card issuer or bank. The message may ask you to click on a link to update your account information or call back to discuss a problem.
In some cases, scammers may even claim they are investigating possible fraud on your account. They ask for details, such as your account number or Social Security number so they can investigate further. These are all attempts to get you to hand over sensitive information.
How to avoid these scams:
Do not click on any email links or attachments.
Scam phone messages may include a callback number, but you should ignore that.
Don't call the phone number they gave you. Call the phone number you have. Otherwise, you could find yourself on the phone with the scammer, rather than an actual bank representative.
Don’t give personal information unless you initiate the call with the bank or creditor. If they call you, you should always be suspicious and guarded with your personal information.
3. Charity Scams
You could receive a call asking for donations to the local police department or military families. The crooks elicit information about your bank account or debit card to process the gift over the phone – giving them full access to your checking account.
Facebook
Personal pleas for help and tying the need to something personal to you.
How to avoid these scams:
Be cautious about giving your information to individuals who reach out by telephone or email.
Never give on impulse. If the needs sound legit, take the time to research the organization that’s doing the fundraising. You can use charity navigator or a similar type of organization that qualifies charities by how they manage their finances. How much they spend on actual charity activities versus fundraising or operational costs.
The safest way to give to a charity is by choosing an organization you know and trust.
4. Pyramid Schemes
Pyramid schemes are scams that need a constant flow of new participants to keep them going.
They are marketed as multi-level marketing programs or other types of legitimate businesses. They use recruits’ "investments" to pay “profits” to those participating longer.
Pyramid schemes collapse when they can't recruit enough new participants to pay earlier investors. These scams always fail—it’s mathematically guaranteed.
Safety Tips
Be wary if you have to recruit more participants to increase your profit, or get your investment back.
Ask if the company sells non-tangible products or technical services, rather than physical items.
Check out the business with the Better Business Bureau, your state attorney general, or state licensing agencies.
Ask to see financial statements audited by a certified public accountant (CPA). Find out if the company earns income from selling its products or services to customers, not to its sales team.
Be skeptical of success stories and testimonials of fantastic earnings.
5. Investment Scams
Ponzi Scheme
Don’t be influenced by promises that seem too good to be true. These promises may include “guaranteed earnings” or “risk-free” investments.
Don’t invest in something just because the investment professional is nice, seems trustworthy, or has professional titles.
Don’t invest based on claims that other people, "just like you," have invested.
Don’t feel obligated to invest, even if the professional gave you a gift, lunch, or reduced their fees.
Be aware of your emotional state.
If you lack all the information to make an informed decision, you should pause and do your due diligence to make sure the investment is legitimate.
7. Award Scams
In these scams, you are typically told you've won a foreign lottery or $1000 gift card, a new iPad, etc.
With a foreign lottery, crooks will send you a huge check to deposit into your checking account. You will then be asked to immediately wire a portion of the funds to pay for government taxes and administrative fees.
With a gift card or iPad type of scam, the scammers will have you enter personal information, which in turn they can use to target your accounts.
These scams are also used to install malware or spyware on your computer, allowing them access to sensitive information which may even lead to identity theft.
How to avoid these scams:
If you didn't enter the contest, you didn't win it.
No one gives gift cards, expensive electronics, etc. if you fill out a survey! Any company that would do that would go broke. Think it through, and you’ll realize it’s a bait and hook tactic to take advantage of you.
Something to note about foreign lotteries: it is illegal to participate in a foreign lottery via mail or phone in the U.S.
Additionally, when winning a lottery, you will not be responsible for paying taxes or fees directly to the government.
RESOURCES
Budgeting and Debt Elimination Tools
Jesus on Money by David Thompson - stewardshippastors.com