The most common financial scams and how to avoid them
The more you know about financial fraud, the less likely you’ll fall prey to it. Let’s explore some of the most common scams (and how to steer clear of them).
It’s easier than you think to become a victim of financial fraud, and it happens to hundreds of Americans every year. If you’d like to avoid scams and retain control of your money, staying informed is vital. This article covers some of the most common scams you’ll come across, from insurance fraud to eBay trickery.
What counts as a scam?
Since they come in so many different shapes and sizes, scams can be tough to define. Generally, a scam is some kind of deceptive scheme or dishonest trickery used to cheat a person out of something (most often this is money, though it could also be a more tangible asset like property).
The government offers several different local and federal methods for reporting a scam. While some scams are small-scale and seemingly not too harmful, others are incredibly sophisticated, dangerous and far-reaching.
How can I avoid becoming a victim of common scams?
We all have different attitudes to investment risk, but there’s one thing we can usually agree on — getting caught up in a scam is not a risk we’re willing to take. The best things you can do to keep away from fraudulent situations and scammers with bad intentions are:
Think through purchasing decisions carefully
Ensure you only ever share financial information securely and in the right circumstances
Avoid any situations that seem genuinely too good to be true (they often are)
Do your research on each company/person that receives your hard-earned money
Use security software on your computer
Use two-factor authentication
Stay informed about common scams cropping us across the country (for which you’re in the right place)
Common Craigslist scams to avoid
The team at Craiglist is hot on the heels of scammers, and there’s a dedicated page on the site that gives users as much information as possible. This page includes scam avoidance advice and explains that most scams on Craiglist include one or more of the following:
Emails or text messages from a seller who’s not local to the buyer’s area
Non-specific initial inquiries about products for sale (“this item,” “that product,” etc.)
Unusual money arrangements like Western Union, Money Gram, cashier’s checks, money orders, PayPal or Zelle
Not being able/not wanting to meet in person to finish a sale
Common eBay scams to avoid
Generally speaking, the advice for eBay buyers and sellers is simple: Don’t take purchases and communications off the platform. Always use eBay messages and finish the sale through eBay. That way, you’ll be protected if a scam occurs. eBay scam examples include:
Deceptive listings that confuse buyers (for example, listing the box an item came in but not the item itself)
A seller failing to send an item after the buyer has purchased and paid for it
A buyer falsely claiming that an item wasn’t delivered/that a product wasn’t inside the box delivered and demanding a refund from the seller
A buyer offers to make a payment outside of eBay to help the seller avoid fees, but the seller then has no recourse when the buyer fails to pay
Common email scams to avoid
Email phishing is an insidious way for fraudsters to harvest personal and financial information from thousands of targets at once. Most of us know that a prince from a far-off country revealing that you’re secretly related likely isn’t being honest. But what if a scammer emailed you and convincingly posed as your bank? Could you be taken in? Watch out for:
Emails that lead you to a non-secure payment link
Emails from unknown senders including a link (it could contain malware)
Emails claiming suspicious activity/suspicious log-in attempts
Emails asking you to confirm personal details that the sender (your bank, for instance) should already have
Emails asking you to update your payment details (especially when you know your card hasn’t expired/changed)
Emails offering expensive items as “TOTALLY FREE” gifts
Common Cash App scams to avoid
It’s quick and easy to send and receive money on Cash App, and the user base in the US is ever-increasing. But it’s also essential to know how to avoid getting scammed if you’re going to use Cash App. With increased convenience comes (at least in some cases) increased risk. Notable red flags include:
A scammer claiming they’ve accidentally sent you money and asking for a refund (they’ll often pay with a stolen card but ask you to refund their card, and you’ll eventually receive a complaint from the owner of the stolen card and have to pay twice)
Fake alerts from your bank telling you that your account has been compromised and asking you to transfer your money to a “secure” Cash App account for “safekeeping”
Scammers requesting payment in advance through Cash App for things like Facebook Marketplace purchases, then ghosting once they have the money
What about common insurance frauds?
Insurance fraud is another common type of scam. It’s defined as deliberately lying to an insurance company for financial gain. It’s illegal, and it can come with heavy penalties and even jail depending on the nature of the deception. Insurance fraud steals over $300 billion from American consumers every single year.
Multiple groups of people can be affected by insurance fraud alongside the insurance company, including individual brokers, policyholders, and third-party claimants. If someone attempts to involve you in this kind of fraud, it’s important to be aware of some of the most commonly run scams:
Auto insurance fraud - False car theft claims are common, alongside things like unrecognized drivers, underestimated mileage, and pretending a car is stored in a garage when it isn’t, to save on premiums. Auto claims are also sometimes padded
Healthcare fraud - The National Health Care Anti-Fraud Association (NHCAA) estimates that tens of billions of dollars are lost annually to healthcare fraud. In the health insurance industry, scams include false billing, upcoding and duplicate claims
Premium diversion - The most common insurance fraud scheme, according to the FBI, is premium diversion. This typically happens when an insurance agent doesn’t sell premiums to an underwriter and keeps the money for personal use
Property fraud - Homeowners and tenants sometimes fake theft or property damage to claim for household items on insurance. People may damage their property to report falsely, exaggerate an actual crime or claim for things they never owned
Keep yourself informed and protected against possible financial scams. Speak to a financial advisor at Unbiased today and let us help you keep your money safe.
Charlie Barton is a writer at Unbiased. He has been writing about personal finance and investing since 2017, with extensive knowledge of platforms and products. Charlie has a first-class degree from the London School of Economics.