Be Wise to Financial Scams

Scammers can appeal to the best and the worst in each of us. Some appeal to our generosity, others to our greed and desire for quick riches. They're savvy, and they know that such tactics will work at least some of the time, and that's good enough for them to profit from. Ever more sophisticated offers from all kinds of unscrupulous companies and individuals continually arrive by telephone, postal mail, and email – each more cleverly disguised than the next to look and sound authentic.

Scammers seduce unsuspecting individuals into believing that they actually have a chance to cash in on a great deal. What's more, our modern-day lifestyle can also often work in the scammers' favor. At the hectic pace of our everyday lives, it's easy to become confused by scam artists or fail to notice important details. Scammers can also victimize their prey through intimidation or people's natural tendency toward altruism – to reach out to the poor and needy through a kind and giving heart.

Listed below are a number of scams to be constantly vigilant for – some old, others newer, but all have been known to be quite effective in robbing individuals of vast sums of money.

Home improvement scams - Many of the worst scams going have involved predatory home improvement deals. Predatory lenders, sometimes working with contractors, bilk owners of their home equity by advancing a series of high-cost loans that the owners all too often are unable to repay. Or, the contractors hired directly by a homeowner may disappear completely after taking the homeowner's money – with no repairs being made to the property. If you're considering home improvement work, deal only with a licensed contractor and be sure to verify all references.

Credit repair scams - Many credit-repair services claim to be able to almost magically erase negative entries from your credit file or to create a completely new credit identity (which, by the way, is illegal). Don't believe such offers. Be sure to read the article Beware of Credit Scams, Flams, and Dirty Rotten Tricks for more details about these bogus strategies.

Travel and vacation schemes - Unsavory travel clubs often promise free travel certificates that usually come with significant undisclosed costs. Or, a vacation may be offered (and sometimes actually awarded) as a prize. However, the travel involves so many terms and conditions as to render the trip virtually useless. For example, that "dream vacation" may only be taken in the middle of winter and includes no airfare.

Telemarketing fraud - Telemarketing and legitimate survey research are not in themselves fraudulent activities. However, you must remain aware that the telephone is still a prime tool used by scammers to dupe the unsuspecting. They often call to announce that you've just won a fabulous prize. Of course, they cannot release the prize to you until you pay the "taxes and transfer fees." Here's the first crucial point to remember in this: your taxes are between you and the government. Yes, you must pay taxes on a lottery jackpot or sweepstakes prize, but you pay them directly to the government, not to an intermediary. If you're asked to pay any amount up front, be wary. If you do pay, you may never receive the prize or hear from the telemarketer again.

However, if the offer sounds legitimate and you want to go ahead with it, take precautions. Notify the caller that you do not respond to telephone requests for money, and ask the caller to instead mail you the solicitation or offer. If the call is fraudulent, don't be surprised to hear a very sudden dial tone. If it's legitimate, the caller should have no problem agreeing to your request. This brings us to the second crucial tidbit of wisdom that you'd be wise to hold onto: never give your credit card or bank account information to an unknown caller, and never send money in advance for an item that you didn't order or haven't received.

Many Americans have sought to protect themselves from telemarketers by entering their phone numbers on the National Do Not Call Registry.

Business scams - Some scam artists target businesses with fake billings or sell substandard office products. If you're a business owner, always check credentials and references before you switch vendors. Additionally, ask all callers who contact your business with requests for donations to charities or upcoming civic events to put their requests in writing. Large companies generally have their advertising and donation budgets preplanned for the year and simply decline such offers, so small businesses are the more frequent targets. Again, ask for and thoroughly check all credentials.

Sweepstakes - One of the easiest ways to fall victim to a scam is to make a habit of entering sweepstakes. Some are certainly legitimate, but still they're huge moneymaking strategies, collecting astronomical amounts of entries. In fact, it's said that the odds of winning any major sweepstakes prize are approximately one in 50,000,000.

Also, many consumers are unaware that it's against the law to require a purchase in order to be entered into a sweepstakes. So, if a marketer has compelled you to buy a magazine subscription or anything else before you're "officially" entered, the odds are good that it's a scam.

Mystery shopping offers - These offers usually come by postal mail or email. They offer you an opportunity to try a product and keep it if you'll simply provide feedback about how you like it. Or, you may be offered an opportunity to eat at all the finest restaurants in your area and get reimbursed for all or part of your expense, if you only furnish a short report afterward. Some of these offers are legitimate; most, however, are not. Be especially wary of the offers that require you to join a "mystery shoppers club" or in some other way pay advance fees. Even with legitimate mystery shopping opportunities, know what you're getting into and never send in money up front.

Spam scams - These are Internet offers that come through unsolicited email. Every day consumers are bombarded with tons of offers for miracle drugs, fake watches, fortunes from war-torn countries, and other ideas designed to separate them from their money. It's wise to not even open these emails, but if you do, you should not follow any of the links contained there regardless of how innocent or enticing they may appear, and under absolutely no circumstances should you enter any personal or financial information. Report the emails as spam and delete them!

Impersonating a government official - If you receive notice of a windfall or prize being held in your name and it comes from a source that sounds as if it might be official, verify the agency's authenticity before responding. Fake organizations have successfully tricked people into paying bogus taxes, duties, and other advance fees on numerous occasions.

Misrepresenting a consumer assistance organization - Some of the most dangerous and wretched scammers actually pretend to be working on behalf of their victims. They often prey upon the elderly or other members of society that may be in need of assistance and therefore easily fooled into a trusting relationship that will rapidly become quite expensive.

Foreign lottery offers - If you're invited to join an exclusive, can't-miss lottery organization that will provide you with numbers that you're told are most likely to win a foreign lottery (for a hefty up-front membership fee, of course), you need remember only one thing: it's illegal for anyone to sell tickets for a foreign lottery in the United States. Enough said.

Affinity investment fraud - This type of fraud preys on identifiable social groups that usually have strong bonds of trust and esteem; for example, religious groups, ethnic communities, professional membership organizations, and senior citizens groups, to name a few. The scammer often approaches and convinces a respected leader of the group to back the proposal, which appears to be legitimate. The leader then recruits other members of the group to invest their money in the "worthwhile" venture, as well. Because the group is usually based on long-term relationships, it's easy for members to convince each other to also back the plan. To safeguard yourself from such fraudulent investments, don't automatically take the word of even the most respected and trustworthy member of your group unless you can verify all the necessary information independently.

Identity theft - Identity theft is a very serious crime, and it continues to grow at an exponential rate. Identity thieves also continue to become more sophisticated and can gain access to your private information through a variety of sources, from hacking into secure databases to foraging through your garbage, and almost anything in between. And once they get this information, they'll frequently open new accounts in your name and change your address in order to avoid detection. People whose identities have been stolen can spend months or even years – and literally thousands of dollars – cleaning up the mess that the thieves made of their good name and credit record. You can minimize such opportunities by shredding all of your important papers, bills, and receipts and closely guarding your social security number. For additional information, please read the article Be Proactive Against Identity Theft.