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How to Identify Financial Scams

How to Identify Financial Scams

The days of financial scammers making obvious attempts to steal your money and information are over, but that doesn’t mean scams are no longer a risk. Instead, scammers have simply developed more sophisticated strategies to trick users into making bad decisions.

This article will cover some of the most common red flags that can indicate a financial scam. Of course, it’s impossible to cover every possible tactic, but these tips may help you avoid becoming a victim. Remember to be vigilant at all times—never offer sensitive information to any individual or website that seems suspicious.

Someone Sends You Money

Most people expect scammers to ask them for money, so they don’t consider it a threat when someone sends them cash on a service like Venmo. In fact, scammers often “accidentally” send people money in order to take their money before they realize what happened.

We often assume that the money we receive is automatically ours, but that isn’t always the case. Transactions can be reversed for a variety of reasons, including legitimate accidents.

Related: What Christians Should Know About Money

With that in mind, some scammers sent random people money using a stolen credit card and then ask for them to send it back. But the cash they sent you will end up being taken back anyway, and they’ll transfer the money you send them before you can file a claim.

Venmo is a relatively secure platform, but it doesn’t offer the seller or buyer protection that’s available with other services like PayPal. For these reasons, you should also avoid using business to accept business payments, a practice that’s prohibited by the Venmo terms of service.

Someone Asks for Your Password or Information

Every internet user is accustomed to entering personal data on different websites, and this often leads us to share our information without even thinking about it. Even as more people become aware of phishing, it remains one of the most common scams.

Phishing emails and texts generally impersonate reputable companies and organizations such as your bank and use that authority to gather your information. Furthermore, these attempts are now much more difficult to recognize than they were ten or fifteen years ago.

Most phishing attempts start with a notice that gives you a sense of urgency, leading you to let your guard down. For example, they might say that there’s been suspicious activity on your account. Some scammers may even say that your password has already been compromised and ask you to enter it as part of the reset process.

There’s no way to anticipate every possible tactic that a scammer could employ, but you can reduce your risk by looking for certain indications that an email isn’t what it appears to be. In addition to clear red flags like typos and grammatical errors, you should also be suspicious of any email that asks for personal information or leads to a URL that doesn’t exactly match the business that the message is supposedly from.

For example, one phishing attempt replaced the website with, an insignificant change that most users wouldn’t notice. Remember to double check the URL whenever you access a website through an email or text.

Something Seems Too Good to Be True

Some phishing attempts try to trick you with bad news, but others tempt you by giving you an offer that you can’t refuse. Of course, an offer that’s that good probably isn’t exactly as it seems, so it’s important to avoid falling into a scam by doing some research and not making any immediate decisions.

Multi-level marketing may be the most common form of this scam, and many people join MLM businesses without fully understanding what they’re getting into. While it’s technically possible to make money in these schemes, the reality is that multi-level marketing is almost always a bad idea.

Rather than using a sustainable business model, multi-level marketing schemes typically allow their members to earn money simply by introducing people to the organization. They may even charge new members upfront for the “privilege” of joining, and this is the clearest sign that you’re being recruited by an MLM.

Multi-level marketing plans and similar schemes rely on people jumping at the opportunity to earn a lot of money without reading the fine print. No matter what financial situation you’re in, you should always be careful when you’re asked to make an immediate decision.

Someone Offers to Negotiate or Settle Your Debts

Just as multi-level marketing companies target people in need of cash, debt relief scams look for people who are struggling with large debts. They typically promise an incredible debt reduction that may seem like the perfect solution.

While debt consolidation is often a good way to pay down debts, “debt relief” can’t magically remove your debts. A request for upfront payment, which is illegal, is the most common red flag associated with debt relief scams.

If you’re having trouble with debt, you should consider looking for debt consolidation or speaking directly to creditors. Don’t fall for this scam and pay for something that won’t have any impact on your debt.

Financial scams are surprisingly prevalent, and most of them rely on people not being careful when it comes to their money and personal information. Simply staying vigilant and understanding these red flags will help you identify many of the most common financial scams.

About the Author Dave