How to Spot a Financial Scam

How to Spot a Financial Scam



Here’s how to spot a financial scam and get your warning signs before you fall victim.

We all like to think we’re infallible, however financial scams are more prevalent today than ever before. It can be tricky navigating such scams when you’re bombarded through the mail, email, telephone, and social media. And it happens to the best of us. So how do you spot a scam? And what can you do to avoid them as best as possible?

How to Spot a Financial Scam

6 tips for spotting a financial scam

When there’s a will, there’s a way, and unfortunately, that goes for financial scams too. It’s important to be prepared so that you can learn to avoid them. So here are some practical tips to ensure that you’re one step ahead. 

1. Avoid answering calls from unknown numbers

In the era of smartphones, people can disguise numbers and create new ones with ease. If you’re concerned about missing a call, remember that legitimate inquiries often result in voicemails (though not always). And if you do pick up the phone, take everything with a grain of salt. If a caller is asking for more money than required, and with urgency, hang up. 

2. Don’t sweat an IRS call

We know, this sounds like blasphemy. However, the IRS normally won’t call you – if there’s truly an issue with your Social Security Number or taxes, you’ll usually find out in the mail first. So go ahead and delete those ominous automated voicemails. 

3. Leave suspicious links alone

Trust your gut and don’t click suspicious links, no matter how curious you may be. Sometimes links circulate through social media, sometimes through texts or emails – and clicking can give way to personal financial information. Not so sure about a link? Here are some pointers to help you make the right decision:

If the answer to any of these questions is yes, it’s best to leave the link alone. 

4. Tread lightly with checks

If you receive a check from anyone other than a personal connection or verified employer, tread lightly. There’s been an uptick in fake check scams, which prey on good intentions. Fake checks can take weeks to be discovered, which is why these scams are prevalent and why even banks get fooled. If you ever receive a check and are told to buy things like gift cards or pay taxes on the check, run for the hills. Common vehicles for fake check scams?

5. Analyze investment opportunities carefully

If you’re being promised crazy returns with virtually no risk for investment, be skeptical. While it’s possible to earn double-digits on investments, anything too good to be true should sound an alarm. This is especially true for products like offshore CDs and bank accounts. 

6. Proceed into MLMs with caution

Multi-level marketing (“MLM”) businesses are making a comeback in the age of the internet but proceed with caution. There’s a lot of allure to MLMs – the ability to set your own schedule, work from home, and build a team. However, these companies can often drift into pyramid scheme territory. If the business is more focused on recruiting people than selling products, that’s a big red flag. Additionally, high start-up costs and complicated payment processes are other signs of pyramid schemes.

What to do if you’ve found yourself in a financial scam

First, don’t panic. It happens more often than you’d think, and there are steps you can take to protect yourself from any fallout. With some work, you’ll come out on the other side being able to help others. 

First, if you’ve sent money via check, wire, or even gift card, call the issuing company. You can be straightforward and say the money was used in a scam. In some cases, if you act quickly, you can even get your money back. If you did a money transfer, you can ask for the transfer to be reversed. This is harder to do, but if you don’t ask you’ll never know. 

You can also report scams to the credit reporting bureaus and place a fraud alert on your report to prevent scammers from opening accounts in your name. 

The next step is to contact the Federal Trade Commission, U.S. Postal Inspection Service, or your state Attorney General to make a report.

Scammers are adapting all the time, so it’s important you know how to deal with them. Remember, if it’s too good to be true, it likely isn’t. Armed with these tips, you’ll be dodging any financial scam like a pro in no time. 

If you liked this post, check out more tips on this post about 8 easy-to-avoid credit mistakes.

Featured Image by Sammy-Williams from Pixabay.

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