Five Common Money Scams – and how to Avoid

By Mike Peterson
In July 29, 2013

In a previous post, I wrote about ATM skimming, an increasingly popular technique that some tech-savvy thieves are using to steal sensitive financial information, such as bank account and PIN numbers. But skimming isn’t the only scam that you should watch out for. 


Want to protect your hard-earned money?  Want to make sure that your sensitive personal information stays, well, personal?  Check out this list of five common financial scams – and tips for how to avoid becoming a victim:


1. Gold-buying scams.  Before I go on, I want to point out that I’m not saying that all gold buyers are crooks.   There are plenty of reputable businesses out there that will buy your unwanted gold for a fair price.  And, if you’ve got a bunch of old, broken jewelry lying around the house, there’s absolutely nothing wrong with trading it in for cash.  But as gold buying has become increasingly popular, the risk of getting ripped off has also gone up.  Some less-than-legit gold buyers are setting up shop and buying gold at way less than its actual value. 


How to steer clear:  If you have gold to sell, start by researching a few buyers.  Try to find a gold buyer that has been in business for a few years, and get estimates from two or three places before you commit to selling your gold.  For an extra measure of safety, avoid online gold buyers — stick to brick-and-mortar shops (such as collectible shops, pawn shops, and the like).

2.  Phishing emails/messages.  While some phishing emails are obviously bogus, some can look surprisingly authentic.  The most convincing ones usually appear to be from a company you do business with – like your bank, your credit card company, and so on.  These emails may have pictures, company logos, and official-sounding language that matches the tone and style of the company’s other communications – but if they ask you for information like your Social Security number, your account number, or your password they’re definitely a scam.  Sometimes, the message will contain a link for you to click.

More recently, phishing scams have found their way onto social networking and gaming sites, too – so be cautious about any messages you receive on, say, your Facebook account.

How to steer clear:  First of all, be very careful about opening emails – from anyone.  Don’t click any links (they could infect your computer with spyware), and don’t send personal information or account numbers (most companies will never ask you to share personal information via email, so that alone should be a serious red flag).  When in doubt, call the company and find out if they sent the message.  If they did, they’ll probably be happy to help you on the phone.  And if they didn’t, they’ll probably appreciate the heads-up about the scam. 

3.  Bogus computer-virus notifications.  You’re surfing the web, and all of a sudden a big, red pop-up ad appears:  “Warning!  Virus detected!” it says.  And then:  “Click here to remove the virus right now!”  Sounds pretty convenient, right?  After all, computer viruses are scary – and this nice company is offering to get rid of that scary virus right now!  And all you have to do is click a link! 

You can probably guess that this is a scam.  In fact, clicking a link on one of those “oh-no-we’ve-detected-a-virus” pop-ups may be one of the best ways in the world to guarantee that your computer does, in fact, get a virus of some kind.  Recently, a phone version of this scam has popped up.  In the phone version of this scam, crooks will claim to be representatives from large, well-known tech companies or Internet providers.  They’ll tell you that they have detected a virus on your computer, and offer to fix it right then and there, over the phone (for a fee, of course).

How to steer clear:  First of all, don’t click links on pop-up ads – especially ones that claim to be from random internet security companies.  Make sure your computer’s antivirus software is up-to-date.  And if a bogus “technician” calls to offer you on-the-spot computer virus removal, simply hang up.

4.  Scams targeting the elderly.  It’s sad but true that elderly folks are disproportionately targeted by crooks looking to make a quick buck.  Many elderly scams appear innocent at first – junk mail, telemarketing calls offering low-cost magazine subscriptions, entries for sweepstakes, and so on – but scammers often use these offers to hijack seniors’ bank accounts, credit cards, or social security funds. 

Another, more recent variation is the “grandparent” telephone scam:  A scammer calls an older person and pretends to be a grandchild in trouble – typically, the “grandchild” is on vacation in another state or another country and needs money for something serious (like bail or a trip to the hospital).  Many unsuspecting seniors have fallen for this in the past few years and have wired hundreds – or even thousands – of dollars to fake “grandkids” around the world.

How to steer clear:  If you’re an older person, the most important thing you can do is be aware that you are at a higher risk to be targeted by would-be scammers.  Don’t give your personal information out over the phone or via email – and think twice about any offer that seems too good to be true.  If you’re a grandparent, use caution if you receive a call from a “grandchild” in need of quick financial help.  Stay calm, and contact his or her parents to get the full story before you open your wallet.

5.  “Bidding fee” auctions.  More commonly known as “penny auctions,” bidding-fee auctions supposedly give consumers the opportunity to bid on pricy items like electronics a penny at a time.  The catch?  Each bid costs money (usually something small, like a penny), and regardless of whether you win or lose, you still pay.  Yes, you read that right:  You pay whether you win or lose. 

Not all “bidding fee” auctions are out-and-out scams (although they’re pretty darn close).  But some penny auction sites have gotten in trouble for using fake accounts to place bids and artificially jack up prices.  Sure, in theory, it’s only pennies – and I’m sure that there are a few people out there who have gotten some pretty great deals from these types of sites.  But is it worth it? 

How to steer clear: The easiest way, of course, is to stay far away from “penny auctions.”  Stick to bidding sites like eBay, or save up the cash and make your purchase from a regular store or online retailer.  If you must use a penny auction site, be very careful:  Read the site’s terms and conditions carefully, and make sure that you’re not overpaying.

Mike is the author of “Reality Millionaire: Proven Tips to Retire Rich” and he has been published in a variety of local and national publications including Entrepreneur Magazine, Deseret Morning News, LDS Living Magazine, and Physicians Money Digest. He holds a B.S. in business administration from the University of Phoenix.

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