3 Common Digital Transaction Scams: How You Can Avoid Them

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The shift from cash to digital payments — credit cards and debit cards, mobile payment apps and digital wallets — has taken the world by storm. According to a report by McKinsey & Company, more than nine out of ten consumers say they have used some form of digital payment method over the past year. But as online payments grow, transaction fraud also grows.

Fraud cost consumers $8.8 billion in 2022, the Federal Trade Commission reported last year, and scammers are making more money per fraud than they were the year before. Younger adults (ages 20-29) reported losing money more often than older adults (ages 70-79), but when the latter did fall victim to a scam, they lost more than anyone else. If people paid the scammer, the biggest reported losses were through bank transfers and cryptocurrency.

TransUnion’s U.S. Consumer Pulse Q2 2023 found that over half (51%) of consumers reported being targeted with online, email, phone call or text message fraud. Nine percent of those who said they were targeted fell victim.

Recognizing common signs of a scam is critical to fraud prevention. Here are some of the most common digital transaction scams to watch out for and how to avoid them.

Peer-to-Peer Payment Scams

Peer-to-peer payment services — such as Paypal, Zelle and Venmo — allow users to send money from a linked bank account or debit card to each other through mobile apps. Unlike traditional banking, the Better Business Bureau says that many payment apps will not cover the cost of fraud, and victims may be unable to get their money back successfully.

Some scammers may try to trick you into sending money through the payment app, pretend to be a loved one in trouble or say you won a prize but you need to pay fees before you receive it.

How to avoid this scam:

• Don’t give account credentials to anyone who contacts you.
• Only use money transfers with friends.
• Protect your account with multi-factor authentication or a PIN.
• Double-check the recipient’s information before sending money.
• If you get an unexpected money request from someone you know, speak with them first to verify.

Digital Wallet Scams

Digital wallets are apps that store various payment methods in one location. Fraudsters can gain unauthorized access to a person’s digital wallet through phishing scams, malware, fake apps and websites and social engineering tactics to to make transactions.

How to avoid this scam:

• Only download apps from trusted locations, such as official app stores.
• Protect your account with multi-factor authentication, a PIN or facial recognition.
• Use a strong password.
• Don’t use public Wi-Fi networks.
• Regularly monitor your bank and credit card accounts for suspicious activity.

Card Skimming

Card skimming involves a physical device installed on a card reader at a gas station, ATM or point-of-sale terminal to steal a shopper’s card information. Criminals can use these devices to steal money from SNAP EBT cards and debit and credit cards. Once they have your information, the criminals can sell the stolen card details or create a copy to make purchases or withdrawals.

How to avoid this scam:

• Check the card reader before using it to make sure it’s intact.
• Cover the pad when typing your PIN to prevent cameras from capturing what you type.
• Use the safest payment method you can, such as a credit card, chip-enabled card or contactless-enabled card.
• Check the security seal at gas pumps and avoid if the tape is broken.

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