It all looks so obvious in hindsight. Make a $500 deposit and your money will grow 18% in 10 days. You can receive a $1,500 loan by MoneyGram if you pay $170 for fees and insurance. A driveway sealer happens to be driving by and offers to coat your driveway for a low price. You deposit a check and are requested to send a portion of it back by wire transfer. Eventually, after you realize you've been had, you say to yourself, "What was I thinking?"
It's easy to let your guard down and be caught by the above scams, all of which were reported by real victims in the Better Business Bureau (BBB) Scam Tracker Risk Report. BBB uses a "Scam Risk Index" to calculate the top ten most risky scams. The index combines the exposure to a scam, susceptibility to a scam, and the monetary risk involved.
The top 5 2016 scams in order are:
- home improvement scams
- fake check/money orders
- fake employment
- online purchases
- fraudulent loans charging "advance" fees.
Rounding out the top ten are:
- investment scams
- fake romances
- false tech support demands (such as fake on-screen computer warnings demanding payment)
- alleged emergencies by friends/family
- the classic fake sweepstakes prize.
Your best defense against these swindles is staying alert for typical signals and applying common sense. Personal Finance Authors David Auten and John Schneider, aka The Debt Free Guys, provide two useful guides: "If their offer is too good to be true, there's a good chance that it probably is...if there is an upfront fee then there is a good chance that it's a scam as well." The use of wire transfers, prepaid cards, and any other form of payment that lacks traceability or protection is another danger sign.
Scammers have generally done their homework, so it's important to do homework on them as well. Recognize the common signs: a sense of urgency or panic, a time-limited "good deal" allegedly based on chance or opportunity, money required up-front without anything more tangible than promises in exchange, untraceable payment methods, and unwillingness to go into detail about who they are and what they represent.
Meanwhile, it's wise to take steps to limit the amount of information scammers have on you. If you don't protect your personal information through strong passwords, encryption, and limited use of open computers or public Wi-Fi hot spots, scammers will have enough information about you to make a background story sound convincing — or they may just skip the scam altogether and move to outright theft through identity fraud. Why convince you to give them money when they can just take it for themselves?
Tax ID fraud is a growing symptom of this disease. Greg McBride, Chief Financial Analyst at Bankrate.com, notes that once thieves have enough of your information to file a form, "they file a tax return very quickly, claim a bogus refund under your name, and then when you go to file your legitimate tax return before the tax deadline, it gets rejected." Along with keeping your information private, McBride suggests filing your return as soon as possible to beat scammers to the punch. If you would like to prevent identity theft, try our credit monitoring service.
Any form of identity theft can do massive damage to your accounts before you realize it. "In order to avoid identity theft or prevent it", says LaTisha Styles, Millennial Finance Expert and Founder of Financial Success Media, LLC, "It's important to keep an eye on your credit report." If you suspect you may be vulnerable and don't plan to open a new credit account soon, Styles suggest placing a credit freeze on your account so nobody can open a fraudulent account in your name.
Vigilance is the key to protecting yourself against scams and theft. Scammers are looking for the slightest hint of vulnerability to attack. Make it hard for scammers to fool you, and they will seek easier victims. It's analogous to the old story of two hikers being chased by a bear: "I don't have to outrun the bear; I just have to outrun you."
If you would like to monitor your credit to prevent identity theft and see your credit reports and scores, check out our credit monitoring service.