Financial scams are more sophisticated than ever, often preying on trust and urgency to trick unsuspecting individuals out of their money. Whether it’s a phone call, text message, email, or even someone showing up at your door, scammers use various tactics to appear legitimate. Recognizing the most common financial scams can help you protect yourself and your loved ones from financial loss.
1. Phishing Scams
Phishing scams usually involve emails or text messages that appear to come from a legitimate source, such as your bank or a popular service provider. The goal is to get you to click a malicious link or provide personal information.
- Never click unexpected links—Verify the sender before clicking on links, especially if the message urges immediate action.
- Look for misspellings and odd email addresses—These can be signs the message is not from a reputable source.
- When in doubt, contact the company directly—Use a verified phone number or website instead of information provided in the message.
2. Lottery or Sweepstakes Scams
These scams claim you’ve won a prize or lottery—even though you’ve never entered one. They often ask you to pay a “processing fee” or provide bank details to receive your supposed winnings.
- If it sounds too good to be true, it probably is—Legitimate contests do not ask winners to pay fees to collect prizes.
- Beware of urgency—Scammers often pressure victims to act quickly to avoid scrutiny.
3. IRS and Tax Scams
Scammers pose as IRS agents, threatening legal action or arrest if you don’t immediately pay supposed back taxes. These typically come via phone calls or automated voicemails.
- The IRS will never call you to demand immediate payment—They typically contact taxpayers via mail first.
- Don’t provide personal information over the phone—Hang up and report the call to the proper authorities.
4. Online Shopping and Auction Scams
You may come across a deal that seems too good to miss on a website or in an online marketplace. Unfortunately, some of these are fraudulent sites offering fake goods or never shipping anything at all.
- Only shop with trusted retailers—Look for secure websites (https://) and check reviews before making a purchase.
- Avoid wiring money for purchases—Use a credit card or secure payment platform for better fraud protection.
5. Romance Scams
Common on dating websites and apps, romance scams involve someone gaining your trust over time and then asking for money under various pretenses—medical emergencies, travel funds, or family issues.
- Be cautious with online relationships—Especially if they move quickly and involve requests for money.
- Never send money to someone you haven’t met in person—No matter how convincing their story seems.
6. Tech Support Scams
Scammers claim your computer has a virus or technical issue and offer to fix it—for a price. They may ask you to download remote access software or pay for unnecessary services.
- Genuine tech companies don’t make unsolicited calls—Ignore calls from people claiming to be from tech support unless you initiated the contact.
- Don’t give remote access to your device—Unless you’re sure you’re dealing with a verified provider.
7. Investment and Ponzi Schemes
These scams promise high returns with little or no risk. Ponzi schemes pay returns to earlier investors using money from newer ones, collapsing when they can no longer recruit new participants.
- Be skeptical of guaranteed returns—All investments carry some risk.
- Check if the advisor or company is registered—Use the SEC’s Investment Adviser Public Disclosure database or FINRA’s BrokerCheck.
Final Thoughts
Awareness is your first line of defense against financial scams. Staying informed, being cautious with your personal and financial information, and verifying anything that seems suspicious can go a long way in protecting yourself. If you suspect you’ve been targeted by a scam, report it to the Federal Trade Commission (FTC) at reportfraud.ftc.gov. Taking quick action can help limit the damage and prevent others from falling victim.