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5 Common Financial Scams and How to Avoid Them

Our sensitive financial information is transferred on a daily basis. Whether it’s making a purchase online or checking our bank account, it’s no wonder that thousands fall victim to financial scams each year. Millions of dollars are lost annually by unsuspecting consumers who don’t manage to catch the signs of a financial predator looking to take whatever they’ve got. Whether you use personal checks or secured credit cards, you need to be aware of financial threats so you can stay vigilant. Here are five common scams with tips on how to protect yourself.

“419” Fraud

419 Fraud refers to bogus spam e-mails originating from Nigeria that promise mass amounts of wealth if you help someone with an advance payment. The e-mails usually claim to be from a Nigerian lawyer or nobleman who has isolated money in a forfeited account and needs financial help to secure it and transfer it out of the country. It then promises you millions of dollars in return from this isolated account if you send your banking information so this person can secure and transfer the fortune out of Nigeria. These are always completely fabricated; not a single part of these e-mails is true. If you receive one these e-mails, never reply with personal information or download any attachment. Just delete it.

Advance Fee Schemes

These occur when a con artist convinces you to make an investment to get a return for something of greater value. Victims are often asked to sign a contract to connect the investee with the investor’s financing source and pay an advance fee. The problem is that there’s a clause hidden in the fine print that rules the signing party ineligible to receive anything in return for their contribution. So long as the person who asks you to sign it actually secures something of value with your fee, the contract is legally binding. If you ever encounter an opportunity like this, it’s too good to be true. Decline the offer and, if you can, gain enough information to report this person to the police.

Identity Theft

If you’ve ever looked at your bank statement and seen random charges you know you didn’t execute, you’ve probably been a victim of identity theft. Hackers and con artists steal enough personal information from an individual to access financial information and use it to make purchases or drain bank accounts. If you notice anything like this on your statement, notify your bank immediately. Otherwise, you risk losing a lot of money and end up having to rebuild bad credit. You can help prevent identify theft by always tearing or shredding any sensitive papers you have (even something like an ATM receipt) before throwing them out. Also, when making purchases online, make sure you can see a closed lock icon with a URL starting with https:// before submitting any credit card information.

Redemption Fraud

Remember those old TV commercials where the old man in the question mark suit offered to sell you a giant manual on how to retrieve redemption funds from the federal government? He claimed that he wrote the book the Treasury didn’t want you to know about. Well, surprise, that was a giant scam. Redemption fraud happens when someone like this offers you a kit or manual that tells you how to legally secure funds from the treasury. They’ll use pseudo-legal terms, customer reviews claiming success, and even a notary to convince you that the offer is legitimate. However, once victims receive their kits, they do not get results because they use federal forms outside of their intended purposes. Perhaps someone did have success with these methods, but the legal loophole has been closed by the time the book is written and offered to you. Never buy any kit or manual that promises to give you information on how to secure funds from the government.

Telemarketing Fraud

Have you ever received a phone call from a telemarketer saying you’ve won a special offer and if you don’t act now, it will be gone? Chances are that was a scammer trying to rip you off. They usually entice you with a bogus offer and get your credit card information for an advance payment of some sort. They then give you faulty contact information in case you don’t receive your offer in the near future. By the time you realize you’ve been had, they’re impossible to track. If you get an offer like this over the phone and they ask for any personal information, simply hang up.

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Logan Abbott's picture

Logan Abbott is a personal finance and credit card expert with over 5 years of experience writing about each topic. He is a graduate of the USC Marshall School of Business, and also contributes to other online finance publications. He has been quoted in the New York Times, San Diego Union Tribune, TheStreet, and more.

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