6 Dangerous Money Scams To Avoid

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Financial scams are responsible for huge monetary losses by American consumers each year, and they’ve been on the uptick recently.

Federal Trade Commission data from 2021 shows the agency received 2.8 billion reports from consumers who reported losing over $5.8 billion to fraud, which is a 70% increase from the previous year. According to the FBI Internet Crime Complaint Center, $10.3 billion was reported lost by Americans to online scams in 2022.

To learn about common financial scams and expert tips for avoiding them, GOBankingRates consulted with Laura Harris, Certified Fraud Examiner and research specialist at the Association of Certified Fraud Examiners. Here’s what you need to know.

Advance-Fee Scams

“Advance-fee scams are one of the most common scams,” said Harris. “A fraudster promises something but requires that the fee be paid upfront. Perhaps it is a vacation that someone might have won, but requires a processing fee, or maybe a contractor requires pre-payment for materials. The consumer must give money upfront — in advance — before what they are paying for is to be ‘received.'”

Charity Scams

“Consumers should be aware how common charity, nonprofit and fundraising scams have become,” cautioned Harris. “Scammers will create sad stories, steal photos online from other social media platforms and humbly solicit donations. Especially around the holidays, this can be a way to manipulate consumers.”

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Romance Scams

“Remember, fraudsters can be charming,” Harris advised. “They might know just what to say to get a new friend or boyfriend/girlfriend to loan them money or invest in their business. Social media, dating websites and apps — even church groups — can give clever con artists the opportunity to find a lonely or vulnerable person.”

Affinity Scams

“Much like the romance scheme, a fraudster targets a particular type of individual with whom they might have a connection,” said Harris. “It could take the form of racial minorities, older individuals, language minorities, religion and more. By sharing an affinity, the fraudster establishes a connection before exploiting it.”

Revenge Scams

“If a consumer has been a victim of a fraudster, they should be wary of a company contacting them and asking if the victim would like to get their money back or put the bad people out of business,” Harris said. “This is usually the same people who scammed them, which is how they knew to contact the victim. And of course, they require a fee to get the process started.”

Phishing, Smishing and Vishing

“While many are familiar with email phishing scams, designed to get personal, private information such as passwords or account numbers, scammers now use texting as well,” said Harris. “SMiShing involves using short message service (SMS) texting to reach out to victims, possibly offering a link for them to click. Vishing is similar, but the victim receives a voice mail with alarming information that requires urgent attention or a robocaller offering a deal.”

Expert Tips To Help You Avoid Financial Scams

“While the internet may be a place where consumers lose money and fall for scams, it can also be a place for them to research the person, business or opportunity with which they are being presented,” said Harris. “From a quick search of a business name and ‘scam’ or ‘review,’ they can find if others have been victimized and are warning others.”

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Harris also said that you can check with the following legitimate sources, either online, via email or by phone:

  • Better Business Bureau
  • Charity Resources
    • BBB Wise Giving Alliance
    • Charity Navigator
    • CharityWatch
    • GuideStar
    • Federal Trade Commission
  • FBI Internet Crime Complaint Center

“Remember that if it seems too good to be true, it often is,” Harris said. “Opportunities should not be urgent, relationships should not be conditional and businesses should have references. If in doubt, ask questions. Businesses, people and charities should be happy and excited to talk about their mission and discuss it in depth — not only in the capacity to get investment. Be suspicious of high-pressure sales tactics, and FOMO/YOLO advertising.”

Harris added, “We would all love more money, but scammers would love it more. Whether it is an investment, prize or relationship that is requesting money, one of the best things consumers can ask themselves is, ‘Am I prepared to lose money on this?'”

Victims can report scams to the FTC here.

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