How to Protect Yourself From Financial Scams

Every year, countless victims fall prey to financial scams, and with the internet at everyone’s fingertips, today’s technology makes it easier than ever for criminals to find financial data and connect with unsuspecting targets. 

Whether you’re looking to recognize, avoid or safeguard against common scams, here’s what you need to know to protect yourself from con artists.

Common Financial Scams to Avoid

When outsmarting would-be con artists, knowledge is power. Familiarize yourself with these typical scams.

• Tax scams: Tricksters pretend to represent the IRS to collect a tax refund in your name.
• IRS scams: A scammer calls pretending to be an IRS official and claims you owe back taxes, threatening to arrest or sue if you don’t pay immediately with a credit card or wire transfer.
• Money-transfer scams: Criminals convince you to wire funds to inherit money or collect a prize. If it sounds too good to be true, it probably is — if you cannot recall having a millionaire Great-Aunt Petunia or entering a contest to win thousands of dollars, it’s because they don’t exist.
• Bank scams: A criminal calls or emails, posing as a bank representative, and requests your account login and password to access or sell your account information.
• Credit card scams: A fake “representative from your card company” calls, reports a suspicious charge and requests the security code from the back of your card, which they use to make fraudulent purchases. Skimming scams occur when a criminal puts a disguised electronic device over an ATM to steal card information as people use the machine.
• Real estate scams: A charlatan poses as your mortgage broker and asks you to wire your down payment to an incorrect address — theirs — and they disappear with your money.
• Charity scams: After a public tragedy or natural disaster, criminals take advantage of your desire to help others. They create fake charities to collect donations, then vanish. Before you donate, look up the organization using Charity Navigator, Charity Watch and the Better Business Bureau’s Wise Giving Alliance.
• Online and email scams: In a phishing scam, criminals pose as a financial institution and request personal information. Cybercriminals send malicious links and ransomware to steal or lock your files, demanding a fee for returned access. Read on to learn more about how to avoid financial scams online.

Other Telltale Signs of a Scam

Scammers have a few go-to tricks to convince victims to share sensitive information or send money. 

• Insist you pay in a specific way: Gift cards and wire transfers are common requests. If a stranger sends a check and asks you to deposit it and pay them back, it’s a scam.
• Demand you act immediately: Criminals trying to trick you out of your hard-earned money don’t want you to have time to think critically. That’s why illegitimate operations pressure you not to hang up or will threaten to sue or punish you somehow.
• Claim there is a prize or a problem: Scammers lure you with winnings from a lottery, sweepstakes or contest. They may claim you owe money to an institution, or report a “problem” with your account.
• Pretend to be a trusted organization: Scammers know how to sound official, posing as the government, medical organizations, utility companies and more.

How to Protect Yourself From Financial Scams

Prevent financial scams with these six steps.

1. Remain Calm

Scam artists know what to say and how to say it to catch you off-guard, confusing you and benefiting them. Tricksters capitalize when people panic and respond in fear. If you suspect you may be the target of a scam, take a deep breath and stay calm. When you take the time to focus and think critically, you can recognize falsehoods in their statements and realize you are dealing with a con artist. 

2. Enable Two-Factor Authentication

Sign up for two-factor authentication, which protects you from hacking attempts and gives you control if someone falsely claims your account has become compromised. 2FA provides more security than a single password alone, requiring users to provide a second authentication factor to verify themselves, such as a personal identification number, text code or answer to a specific question.

3. Check and Validate the Source

Healthy skepticism and research are secret weapons against fraud. A quick internet search can pull up evidence of untrustworthiness or prove that the business does not exist. Investigate companies with the Better Business Bureau’s scam tracker tool to monitor illegal business schemes.

Always validate the source, and remember:

• It’s against the law for debt collectors to harass you or threaten arrest. 
• IRS representatives will not demand that you make immediate payment to a source other than the U.S. Treasury, and they must present credentials if you ask for them.
• Your bank will not ask for your login information, account number, Social Security number or other sensitive information by text or email.

4. Get a Second Opinion From Someone You Trust

If a suspicious person contacts you, run it by someone you trust — a family member, friend or mentor. They will be separate enough from the high emotions present in the situation to evaluate the alleged representative with fresh eyes and determine whether you’re dealing with a con artist.

5. Take Steps to Protect Yourself Online

With more than 85% of Americans spending time online every day, it’s no wonder thieves use online resources to find their victims. And their efforts have been successful — the FBI’s Internet Crime Complaint Center reports that between 2016 and 2020, more than $13 billion in losses occurred due to internet-enabled fraud, exploitation and theft, and online fraud overall continues to climb.

Fortunately, there are several ways to prevent financial scams from online predators.

How to Avoid Being Scammed Online

• Only click on emails and links from people you know — if messages come from strangers or unfamiliar companies, close and delete without engaging.
• Use strong passwords and, whenever possible, 2FA.
• Utilize a secure password manager like Keeper, LastPass or Bitwarden.
• Use anti-virus protection software.
• If you receive an alert from someone claiming to represent an organization, directly contact that entity to verify.
• If you suspect someone has compromised your account, request an immediate credit freeze while you determine next steps.

6. Take Extra Precautions If You’re a Senior

Older adults can be particularly susceptible to cons. Watch out for these three scams used to exploit seniors.

• Grandparent: Criminals impersonate grandchildren to request money for an unexpected financial problem.
• Health care: Con artists pose as Medicare or insurance representatives to demand false medical bill payment.
• Romance: Exploiting the vulnerability of older adults and widows, scammers contact seniors through dating sites, build trust and request financial support.

Seniors who have a disability or cognitive impairment like dementia are at higher risk for scam targeting. With older adults losing nearly $3 billion every year to fraudsters, it is critical to take steps to establish financial scam protection for seniors.

Tips to Avoid Financial Scams for Seniors

• Keep your door closed to all door-to-door salespeople.
• Add your phone number to the National Do Not Call Registry.
• Never supply financial or sensitive personal information over the phone unless you initiated contact and know the company is legitimate.
• Get recommendations from trusted friends or family before hiring a service provider who may enter your property — gardener, housekeeper or aide.
• Always research before donating to any organization. Contact a reputable advisor for charitable giving advice.
• Keep financial paperwork and other statements secure, and shred documents as necessary to protect your information.

Secure Your Financial Goals With HSC Wealth Advisors

At HSC Wealth Advisors, we strongly believe in financial education, and we hope these financial scam protection tips empower you to protect yourself and your family. 

With our more than 30 years of experience serving the clients in the Lynchburg, VA., area, you can trust our team of CERTIFIED FINANCIAL PLANNERS™ with your financial, retirement, estate and investment plans. Our fee-only, client-centered approach eliminates conflicts of interest — we accept no commissions and sell no products, so you can rest assured we are always on your side. 

Contact us to discuss your life and financial planning goals with an advisor today!