How to Detect a Scam

How to Detect a Scam

Scams are unfortunately common – and lucrative. The Federal Trade Commission (FTC) reports that in 2022, over 2.4 million consumers reported $8.8 billion lost to fraud and scams. (And those are just the ones we know about.)

But even the best scams throw up red flags. Learning how to detect a scam involves recognizing these flags before becoming a victim.  

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How to detect a scam

Scams constantly evolve, adopting new technologies (social media, cryptocurrency) and impersonating new organizations (Medicare, the IRS). But even “new” scams rely on a relatively small set of tactics to pressure you into compliance.

Unknown or unexpected communications are most likely a scam if you’re:

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Contacted by a known organization or authority

Scammers rely on authority figures and trusted names to inspire immediate action. They may impersonate government organizations, banks, utility companies, and even charities. Many “spoof” (fake) caller ID numbers and email addresses to seem more real.  

What to do: If you receive communication from a “trusted” authority, don’t callback or reply to the given email address. Instead, find official contact information through their website to verify any requests.  

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Contacted out of the blue

Scammers pop up suddenly, knocking on doors, sending unrequested letters and emails, and calling constantly. They may fake documents showing you owe (or are owed) money or need to provide sensitive information. Watch out for bad spelling and grammar or suspicious attachments that probably include malware.

What to do: Verify all unexpected communications through official channels (see above). Never open links or attachments from unverified senders.

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Asked to provide personal and/or financial information

Fraudsters request personal and/or financial information (SSNs, bank login information, etc.) to steal your identity or access your accounts. However, government agencies and banks will never contact you by phone or email to request sensitive information.  

What to do: Verify that you are communicating with official channels and try not to share sensitive information.

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Told to send money upfront

Legitimate businesses, employers, and lotteries never require you to pay upfront to receive a prize or job. Rental and mortgages don’t require large deposits before filling out an application. You know who does? (Hint: Fraudsters. Coincidence?)  

What to do: If you have to pay upfront, it’s not the prize or job for you.

Informed of an emergency or prize

Many scammers act on your sense of hope or desperation. They may:

• Threaten to sic a government agency on you or lock you out of your accounts
• Impersonate romantic interests in need of money
• Offer prizes you have to pay to unlock
• Inform you that your parents are in international legal trouble

Naturally, the only way to claim your prize or make these problems go away is to provide information or money immediately.

What to do: Generally, if you’re in legal trouble or up for a lottery prize, you’ll have an inkling beforehand. Verify all unexpected communications through official channels.

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Promised easy money

It sure seems like scammers know about the “next big thing” ahead of time. Like crypto coins and sales systems that boost incomes tenfold. Work-from-home jobs that require you to buy pricey equipment or training upfront for a huge payoff later. The usual.  

What to do: Unfortunately, most promises of easy money are shockingly empty – and no legitimate business requires you to purchase equipment or training before hiring. Vet all investments and job opportunities thoroughly.  

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Required to use specific payment methods

Scammers prefer payment methods that are immediate and/or untraceable. Examples include:

• Cryptocurrency
• Money wires through companies like Western Union
• Prepaid gift or debit cards
• Peer-to-peer payment systems like Zelle

What to do: If an unexpected transaction method is “as good as cash” – that is, instant and untraceable – don’t engage. In general, it’s safer to use payment methods and cards with strong consumer protections.  

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Paid with a money order or cashier’s check

Conversely, scammers may pay you with fake checks or money orders. They’ll request that you deposit these checks and “front” them the money. By the time your bank processes and identifies the bad check, the scammer’s disappeared with your money.

What to do: Don’t front cash to or accept (or print!) checks or money orders from unknown sources. Ask your bank to authenticate all checks and money orders before depositing funds in your account.

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Pressured to act quickly

Generating a false sense of urgency pressures victims into acting before they can think. Scammers may threaten dire consequences like:

• Arrest or deportation
• Removal of licenses
• Taking over your electronic devices
• Losing out on prizes or privileges
• Cutting your utilities
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What to do: Be wary of any demands for immediate action. Verify all unexpected or time-sensitive communications through official channels.

Told to keep it a secret

Scam artists may ask (or threaten) you to stay on the phone and avoid telling others about the situation. The more people you tell about a scammy situation, the less likely you’ll fall for it.

What to do: If you’re asked to make a transaction in secret, tell anyone and everyone. Family. Friends. The official organization in question. Even Googling the scam can prevent you from becoming a victim.  

Not allowed to see, meet, or talk to the other party

Romantic scammers fake dating profiles to reel in victims for months, requesting gifts and financial aid frequently. However, they’ll be unwilling to video chat, meet in person, or even call. If you do make plans to finally meet, they may have an “emergency” that requires more cash.

What to do: Treat virtual relationships carefully. Request pictures, phone calls, and live video chats. Ask questions. If they refuse to be an equal partner or constantly request money, they’re not your true love.  

Thinking it sounds too good to be true

Ultimately, if something sounds too good to be true, it probably is. Very few people receive million-dollar job offers, win lotteries they never entered, or inherit money from mysterious relatives.

What to do: Trust your instincts. If the price, offer, or circumstances are fishy or too good to be true, don’t bite.

Do banks return scammed money?

If you find yourself a victim of fraud, your bank may or may not return your scammed funds. It all depends on your situation.

Federal regulations

Federal regulations require banks to reimburse most transactions initiated by “unauthorized parties” from your account. Unauthorized parties include anyone who obtains access to your devices or accounts through robbery, force, or fraud. These laws cover all kinds of scams, from phishing links to impersonating bank officials.

Importantly, these regulations cover the following accounts:

• Bank accounts
• Prepaid accounts
• Bill payment services
• Peer-to-peer payment systems with accounts held directly or indirectly by the bank (e.g., Zelle)

Regulations don’t cover everything

Unfortunately, there’s some legal grey area when the victim initiates the transaction. (For instance, sending money through Zelle or handing over prepaid card numbers.) Even if the funds were obtained fraudulently, voluntarily initiating a transaction may leave you on the hook financially.

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Time limits

Generally, credit card companies must reimburse all scammed funds over $50.

However, banks may set time limits for reporting and receiving funds. Notifying your bank of a lost or stolen debit card within two days caps your liability at $50. Waiting up to 60 days limits your losses to $500. But after 60 days, it’s up to the bank’s discretion to return funds.  

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What to do if you are scammed

Even well-informed consumers can fall victim to flashy new scams. If you think your accounts or identity have been compromised, the FTC advises that you:

• Ask the relevant bank, credit card provider, gift card issuer, money transfer app, or wire transfer service to reimburse defrauded funds. Some scams are automatically compensated, while others aren’t.
• If you sent cash by U.S. mail: Contact the U.S. Postal Inspection Service at 877-876-2455 and ask them to intercept the package.
• If you sent cash by another delivery service: Contact them ASAP.
• If you released your Social Security Number: Visit IdentityTheft.gov for next steps.
• If you gave out digital information: Create new logins and lockdown your credit score or issued cards.
• If a hacker accessed your computer: Run a security sweep and update your software.
• If a scammer has control of your phone: Contact your service provider immediately. Be sure to check your financial accounts for unauthorized charges or changes and report those to the relevant parties.

After you’ve tried to limit the impact of the scam, report the scam – or attempted scam – to the FTC ASAP! They will use the details to build cases against scammers and educate the community about it. You might also want to share information with friends, family, or social media to get the word out.