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Common Financial Scams

Credit card phishing is a common financial scam

Protect Your Hard-Earned Money

These days, it sometimes seems like scammers are everywhere. Rarely do I open my personal email account and not encounter a suspicious-looking email. In 2020, losses due to identity fraud totaled $56 billion.1 Financial scams and fraudulent activities represent a real threat to investors and account holders, which is why it’s important to be on alert at all times.

Following are some common financial scams, as well as tips to help you avoid them.

#1 – Debt Collection Scams

One of the most common scams is for fraudsters to pose as debt collectors who are trying to get you to pay on debts you don’t owe. These scammers may claim to be collecting student loan debt, missed tax payments and more. They sometimes say they’re calling from a government agency and threaten fines or jail time if you don’t pay.

What to do: Never provide personal information to anyone who calls you directly. Ask the caller for their name, their agency/company, their physical street address, their professional debt collector license and written proof of the debt you owe. If the caller provides all of this information, do your research to verify the claim is legitimate before providing any personal information or payment. If the caller refuses to provide any information or tries to coerce you into paying, hang up immediately.

#2 – Phishing

Phishing refers to the fraudulent practice of sending emails, purporting to be from a reputable company, in order to coerce individuals into providing confidential information that can be used for identify theft and other illegal activities. Phishing emails can also be used to install malware on an unsuspecting individual’s device.

What to do: If you receive an email that looks a bit suspicious, it probably is. Resist the urge to click on any links, and never provide personal information over email. If you receive an email regarding your finances that appears to be from your banking institution, the IRS or another organization, call the toll-free number of that institution (the one listed on the company’s website, not a phone number in the suspicious email) to verify the email’s authenticity prior to taking any action.

#3 – Ransomware

Ransomware is a type of software that holds your computer or other device hostage by restricting your access until you pay a certain ransom amount. Ransomware can be installed on your device when you click on an infected email or website link. It can also be spread via a contaminated external drive.

What to do: Avoid clicking on attachments and links in suspicious or unsolicited emails and texts. Be sure you have a strong anti-virus software installed on all devices, and update it regularly. Also, avoid using external hard drives if you can’t verify their safety.

#4 – Mortgage Closing Scams

A lot of money exchanges hands during the homebuying process, which makes homebuyers a ripe target for scammers. Some fraudsters pose as real estate agents, mortgage loan officers or title agents in order to steal a homebuyer’s closing expenses or down payment.

What to do: Never discuss the details of your home purchase with anyone you don’t know, even if they claim to be from a reputable company. If you receive a call or email requesting payment, reach out to your real estate or title agent directly to verify the legitimacy of the request.

#5 – Relationship Scams

 I think these scams are the lowest of the low, as they seek to exploit a person’s greatest vulnerabilities. In a relationship scam, a fraudster pretends to fall in love with someone to earn his or her trust then exploits that trust by scamming the individual out of money. These schemes are most commonly initiated on dating websites and social media, often targeting individuals whose spouse recently died. These scammers are known for being committed to the long game, building trust with victims over the course of a year or more before taking them to the cleaners.

What to do: Be wary of anyone requesting large sums of money from you. Be on the lookout for common red flags, such as someone asking for money to cover airline tickets, medical expenses, rent or mortgage payments, school tuition or other financial setbacks. Never wire money to someone you don’t know or have never met in person.

#6 – Prize and Lottery Scams

Scammers have been known to call people and inform them they have won a large sweepstakes, lottery, free vacation or other prize. “In exchange, all you have to do is pay some upfront fees or provide me with your banking information so that I can directly transfer your winnings.” Don’t fall for it. This is yet another attempt to gain access to your personal financial information

What to do: Never give out account login information, credit card numbers or other personal information to anyone. If a prize sounds too good to be true, it probably is.

#7 – Overpayment Scams

This one is a bit more complex but very common. A scammer sends you a counterfeit check and asks you to refund the money to him/her. Or perhaps someone purchases an item from you online and “accidently” pays too much. The buyer then asks you to provide a reimbursement for the overpayment. A short while later, the entire payment will be voided or the check will bounce and any money that was reimbursed is likely gone. Both of these are frequently used scams to get you to send your hard-earned money to a fraudster.

What to do: Never send money to someone who sends you a check. If you sell items online to unknown buyers, never accept a check for more than the agreed-upon selling price. In fact, it’s probably not wise to accept checks as payment at all. Instead, consider using an online payment service, such as Venmo or PayPal.

Would you like some help avoiding common financial scams? Creative Planning is here for you. For more information, schedule a call with a member of our team.


  1. https://javelinstrategy.com/content/2021-identity-fraud-report-shifting-angles-identity-fraud

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

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