4 Financial Scams Exposed: What to Look Out For

Although my outlook on humanity is a generally a rosy one, there are plenty of morally bankrupt people in this world. Scammers, usually based overseas and using technology that spoofs their phone numbers (that is, hides their real phone numbers and lets a fake one show up on your caller ID), take innocent people for a ride every day. Be savvy: learn about these four financial scams and don't let anyone bamboozle you!

The Fake Job Reimbursement Scam

How it works:

You'll find a job posting online or in the paper and be hired immediately- possibly as an assistant, teacher, manager or some other similar position. After you accept the job, your boss will email you that they are out of town, but they would like you to buy some things for them. They'll say that they have sent you a check for the purchase, and the check will include a little extra, too.

Then they'll ask for a reimbursement of the extra amount. They'll have you send it to them via Western Union, iTunes gift cards, or by wire transfer. The reason they like these methods is because they are fast, untraceable, and irreversible. That means once you send the "boss" that money, neither the police nor the bank can help you get it back.

The check they send you will be official looking, and if the scammer is good, even the bank won't be able to it's a fake until potentially weeks later.

Just because the check has gone through doesn't mean it's clear.
Sometimes the bank will clear the "employer's" check at first, so the money shows up in your account. Then claw the funds back later when they realize it's a fraud. This will leave you in the red, because the money you sent to your 'employer' will be already gone.

Just because you found the "job" on a legit site doesn't mean it's not a fraud.
Lots of people have told me that they have found these "jobs" on their college job boards. Even though the job was raising danger signals in their minds, they thought it was legit because it was on a legit site. This did not turn out to be true!

The Fake IRS Agent Scam

How it works:

You get a call one day from someone claiming to be from the IRS. They tell you that they have a warrant out for your arrest because you have a tax debt, and this is your last chance to pay.

They may have plenty of convincing details about you, like your employment history and personal information. They'll tell you you'll be arrested, deported, or worse, if you don't pay immediately.

They'll threaten that the police are on their way, and that you must not tell anyone about this. One of the scammers I've heard said that "If you tell the bank employees that this is why you are withdrawing the money, they will shut your account down and not let you pay and you will go to jail."

With a cool head, it's easy to see that this logic doesn't work out. Why would a legit bank stop you from paying a legit tax debt? But people stop thinking well when they are afraid, and plenty of otherwise bright people fall for this scam every day. Fear makes us lose our minds.

Naturally they will demand you pay in some untraceable or nonrefundable way like Western Union, wire transfer, iTunes gift cards or similar. 70% of fake IRS scams involve iTunes gift cards! This should be a blaring signal that this is a scam, but fear takes over and overrides common sense.

The IRS will never throw you in jail as a surprise. The IRS is a slow, plodding, deliberate and thorough machine, which sends tons of letters before escalating.

They won't threaten prison for a simple miscalculation: they'll usually just fix the math themselves and send you a bill, and they'll even give you a chance to dispute it. Then they'll contact you through the mail to set up a payment plan, and by the time it's time to toss you in jail over deliberate tax fraud, the whole thing will not be a surprise. You'll get tons of mail about it, and perhaps an in person visit.
They'll never threaten your arrest on first contact.

Yes, the IRS is big and scary, and no, you should not mess around with them. But they are reasonable and not going to haul you off to jail right away for a thousand dollar miscalculation.

Also -- the real IRS does not accept iTunes gift cards as payment.

If you are still unsure whether it is the real IRS calling you, hang up the phone and google the IRS customer service number.

The Fake Loan Scam

A cousin of the reimbursement scam, the fake loan scam lures you in by approving you for a loan.

The classic version of the fake loan scam is simple: they promise you a big loan, but ask you to pay a small fee. Then they abscond with the fee you paid and the loan never materializes.

People are getting wise to this, so the fake loan scam is starting to look more and more like the job reimbursement scam. When you refuse to pay the fee upfront, they will tell you it's OK... you can pay it after you get the loan.

So, they will send a fake check loan amount. Like in the job reimbursement scam, the check will appear to clear at first, lulling you into believing it was truly legit. You'll pay the fee, and then the bank will finally catch up to the fact that the check was fraudulent. From here on out, you know how the story goes: the bank claws back the funds, leaving your account in the red.

The Card Services Scam

"Rachel from Card Services" or "Heather from Card Services" will call you up, telling you that they can get you a better rate on your credit card! All you have to do is give them the credit card number (so that they can go shopping with it first).

Seriously speaking, this scam is easy to spot when you know what's going on. If you ask them, "Which credit card is this about?" usually they can't even tell you. But beware: even if they have a lot of information about your card or your background, hang up and call the credit card company directly using the number from their website.

Some Tips on Avoiding Scams

  • Never respond to any kind of phone solicitation. If you're interested in a company's services, look the number up from a reputable source, like that company's website, and call them. This way you know that you are talking to the real company- and not an impostor!
  • Tell Grandma. You're always getting forwards from Grandma about how there might be arsenic in your Tylenol or how Bill Gates is giving away a million dollars to the first 10 people who forward this email (spoiler alert: he's not). Since the frontal lobe, the part of the brain  responsible for good judgement, is the first thing to start to decay in older folks, a lot of scammers prey on the elderly. Do Grams a solid and give her a heads up to these scams.
  • Never spend money on an employer you haven't met. This is the hard and fast rule to avoiding the job reimbursement scam, which is extremely widespread and has many variations. Employer wants me to pay for a background check before they interview me? Nope. Employer sends me a check to cover supplies? Nope. No meeting = no money. Insist on something tangible: a face-to-face meeting or a visit to their office. It's a lot harder for them to disappear with your money if you know where their office is.

Scam Theatre:

I love watching scam baiters on YouTube. I don't know if it's because it's a good hearty laugh, or because it makes my sense of justice tingle. Either way, enjoy these great scam baiters:

The Hoax Hotel: This guy's videos are solid gold. I laughed until I cried.
419 Eater: Some of these scam baiters get really into it. They mostly focus on the good ol' "Nigerian Prince" scam. These stories make for a great read on the train.

If you decide to scam bait yourself, be safe! Use a service to hide your number and never give out your real information.

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