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The Ultimate Guide to Recognizing and Avoiding Common Financial Scams

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Money plays an essential role in helping you pursue your most important goals in life. With proper money management, you can buy a new car or a new house. You can open a business, pay for your child’s college education, or retire early and travel the world. There’s no denying, though, that we all have vulnerabilities around money–and you’ll need to protect yourself if you want to keep your money safe.

At Leaders Credit Union, we have a mission to help our members power their dreams, and that includes helping them to avoid common financial scams. Since today’s financial scammers always seem to be coming up with new ways to steal, we’ve created this guide to help you recognize and avoid some of the most common scams.

What Are the Most Common Financial Scams?

The first step in avoiding financial scams is understanding what the most common scam tactics are.

Phishing Scams

A phishing scam is something that happens when a scammer contacts a target, often via an email or text. The message is often an alert, notifying the recipient of a security breach and requesting a verification of personal information that may include a bank account number, PIN, or password.

Most phishing attacks ask the target to click a link that leads them to a spoofed website that looks like it belongs to a credit union, bank, credit card company, or even a person-to-person payment app like Venmo. Once a target enters their personal information, the scammer can use it to access their money.

Identity Theft

Identity theft occurs when a scammer obtains personal information including things like your Social Security Number, bank account number, passwords, and other sensitive information such as your mother’s maiden name or the name of your first pet.

If you’re the victim of identity theft, you may find that someone has used your information to sign up for new credit cards, loans, and accounts. Unless you get the situation resolved, you may find yourself responsible for thousands of dollars of unauthorized and fraudulent expenditures.

Mortgage Fraud

Owning a home is a dream for many Americans and the power of that dream can make some people vulnerable to mortgage fraud. Mortgage fraud can take several forms, including everything from loan modification scams to phony foreclosure protection.

One of the common traits of mortgage fraud is an unsolicited contact about loan modification. In fact, unsolicited requests are common with many types of financial fraud and should always be viewed with a skeptical eye.

Credit Card and Debit Card Fraud

Both credit cards and debit cards may be vulnerable to scams and frauds. People may get your credit card number by stealing your card, hacking into a system where your debit or credit card number is stored, or by installing a skimmer on an ATM or a point of sale.

Keep in mind that both your finances and your credit score may be impacted if someone steals your card. We recommend taking common-sense precautions, which we’ll discuss in the next section, to protect yourself.

Fake Charities

Charity scams are designed to play on people’s emotions to get them to make donations to fraudulent organizations. Scammers send out phony emails, set up fake websites, and even solicit donations over the phone.

Sometimes, people who have been taken in by a fake charity don’t find out it was fake until they try to deduct the donation when they file their taxes.

Ponzi Schemes

A Ponzi Scheme is a type of investment scam where the scammer convinces people to invest in a product or opportunity that doesn’t really exist, promising sky-high returns on the investment. Often, the money from later investors is used to make early investors whole–but people who get into a Ponzi Scheme late almost always lose everything they invested.

Bernie Madoff ran one of the biggest and best-known Ponzi schemes. Collectively, his clients lost billions of dollars–and he went to prison.

Romance Scam

A romance scam is a scam that preys on a target’s emotions by initiating online contact, building trust, and then asking the target to provide the scammer with money, often via a person-to-person payment app.

It’s easy for fraudsters to set up fake accounts using stock photos. This type of scam may also be referred to as catfishing.

Debt Scams

A lot of Americans have debt and scammers may use the promise of debt relief or the threat of debt collection to convince people to pay them.

You should view any unsolicited contact with skepticism and do some research before entering any agreement with a company or sending money to them.

fraud prevention kit

How Do I Know If I'm Being Scammed?

The key to avoiding financial scams is to be aware of common scams and educated on how to recognize them. Here are some pointers to help you build fraud awareness and avoid becoming a victim of financial fraud:

  • Be wary of unsolicited messages. As we noted above, a legitimate mortgage lender won’t contact you out of the blue to offer a loan modification–and you’re unlikely to get an offer to forgive your debt without asking for one. Be skeptical of any unsolicited offer related to your finances.
  • Pay attention to payment methods. You probably pay your bills in the same way each month. For example, you might have automatic payments set up to take care of your car insurance or wi-fi service. If you get a message asking you to pay in a new way or send money to a new place, it’s almost certainly a scam.
  • Make note of errors and typos. One of the most easily-identifiable qualities of a scam email or text is that the senders often make mistakes. Look at the spelling, grammar, and other elements of the communication–and if you see a lot of mistakes, it’s probably someone trying to scam you.
  • Hover over links. Phishing scams almost always include a link and the message will encourage you to click it to confirm your account or send a payment. If you’re on a computer, you can simply hover over the link and look at the bottom of the screen to see where the link will take you. Compare the URL of the link to the website you usually visit. If it doesn’t match, don’t click it.
  • Research the company. One of the easiest ways to protect yourself against financial exploitation is to Google the name of the company that has contacted you. If it’s a charity, you can go to CharityWatch or another charity ranking organization to see if the company is legitimate. 
  • Don’t give out personal information. No legitimate financial institution will ask you to provide your PIN or password, or any other sensitive information, via a link or over the phone. If someone does ask, then you should assume that the caller or sender is running one or more banking scams and disconnect.
  • Don’t let yourself be pressured. It’s common for scammers to prey on people’s fear about losing money. If you receive an email, text, or phone call where the person on the other end is attempting to frighten you or pressure you into giving them information or money, take a deep breath and remind yourself to stay calm. A lot of people end up losing money because they react out of panic instead of taking a moment to think.
  • Ask questions. Some scammers can be extremely persistent, and one way to let them know you’re not a good mark is to start asking questions. Remember, they’re trying to get your money, so they should be able to answer questions about what they’re asking and/or offering. 
  • Trust your instincts. One of the most important things you can do is to trust your instincts. If you have a negative feeling about something or something doesn’t feel right, you should trust that feeling. We’re sometimes conditioned to talk ourselves out of negative first impressions, but those feelings happen for a reason.

These tips can help you identify scams and frauds and protect yourself and your money. 

What Should I Do If I’ve Been Scammed?

Now, let’s review the steps to take if you have already been scammed. There are a few simple things to do:

  1. Put a freeze on your credit. A credit freeze is a consumer protection that is available from all three major credit bureaus. If you’ve been scammed, you should place a credit freeze on your account. You’ll need to choose a PIN that you can use to “thaw” your account when you need someone to have access to it. You can also place a fraud alert on your account.
  2. Contact your financial institution. There are some circumstances when you’ll need to contact your credit union, bank, or credit card company immediately. For example, if your account has been compromised, you should notify your financial institution right away to avoid any further losses.
  3. Gather documentation of the scam. Before you can report a financial scam to the authorities, you’ll need documentation. For example, you might need a copy of the scam email or text, account statements, and other information.
  4. Report the scam to the authorities. After you have gathered relevant information, you should report the scam. You should report the incident to the local authorities, your state consumer protection office, and possibly to the Federal Trade Commission or You can find additional information here.
  5. Clean up your credit. After you’ve reported the scam, take some time to order copies of your credit reports and review them. As a reminder, the three main credit bureaus are Equifax, Experian, and TransUnion. Make note of any fraudulent or suspicious activity and file a dispute to get it removed from your credit report.

Following these steps will help you recover from the scam as quickly as possible. Going forward, you can use the tips we’ve included here to identify and avoid scam attempts.

Get the Financial Protection You Need with Leaders Credit Union

Financial scammers are persistent, but you can avoid their attempts to trick you by using the tips and advice in this guide. You deserve to pursue your financial goals without the stress of being scammed.

At Leaders Credit Union, we want to make sure our members are equipped with the necessary knowledge to avoid fraud. That’s why we’ve created our Ultimate Fraud Prevention Help Kit, to make sure our members are aware of financial threats and how to protect themselves. This resource goes over everything from common scams to a step-by-step guide on how to protect your accounts, so you can be financially safe.

Report Scams to the FTC

If you were scammed or think you saw a scam, report it to the Federal Trade Commission.