Financial Scams That Can Fool Even Savvy People

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Have you ever been fooled by an optical illusion or a clever magician’s trick? I’m always a little sheepish when it happens because as a smart person, I think I should know better. Falling for a magic trick is harmless and even fun, but falling for financial scams isn’t. Many people have been duped out of thousands of dollars by wily scammers over the years.

You may think that only the elderly and naive fall for scams, but even the smartest and savviest among us can be taken in if we aren’t careful. Here are four popular financial scams to inform your elderly friends and relatives about and to watch out for yourself.

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The Grandparent Scam

An elderly person gets a late-night or early-morning phone call from someone claiming to be his grandchild. This person also claims he’s stranded in another state or another country and he needs money wired immediately for bail, bus fare, or some other misfortune that’s befallen them. This is the Grandparent Scam and it’s happening all over the country.

The “grandchild” asks the victim to keep the secret between them, using language such as, “Please don’t tell mom, she’ll freak!” Another sneaky aspect of this scam is the fact that the scammer often knows the first name of the grandchild, making the phone call that much more plausible.

Why it works: It preys on a grandparent’s softer side and love for his grandchild. And it’s absolutely vile.

How to avoid it: NEVER wire money to someone without first verifying (for sure) who they are and that it is appropriate. Double-check with other family members and call the person named in the phone call to see if he is really stranded in Mexico City. I’ll betchya he’s not.

The Phishing Scam

Your bank, credit card company, insurance company, PayPal or the IRS emails you with a piece of news you must act on immediately! Your password has been changed, your purchase has been confirmed, your account has been breached or some similar tragedy has occurred and you MUST click this link and log in right now to fix it! BZZZZT! Wrong answer.

If you click that link, you risk giving scammers your username, password and other personal data they can use to steal your identity. The tricky part is that most of these phishing emails appear legitimate, right down to the company logo and privacy policy at the bottom.

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Why it works: Ironically these scammers prey on your sense of wanting to protect yourself. My account has been breached? Oh no, I better fix it now by clicking this handy link they provided. Don’t do it.

How to avoid it: NEVER click through a link embedded in an email you get from a company or organization. Especially if it isn’t someone you already have a relationship with. (That’s your first tip-off.) Granted, your bank, credit card, or insurance company may email you from time to time, but even if it’s a legitimate communication, it’s always safer to open a new browser window, manually type their web address and search for the issue that way. Most of the time, there is no issue at all. To report a phishing email, simply forward it to: phishing-report [at] us-cert [dot] gov.

The Heartstrings Scam

From Hurricane Sandy to Sandy Hook, disaster is a prime opportunity for the unscrupulous to take advantage of the kind and giving nature of others. It’s disgusting, but it happens in the wake of every tragedy. Be on the lookout for email campaigns that send you to a good-looking, albeit fake, website, where they are all too happy to accept your kind donation for the cause. Unfortunately, the cause might be their own pockets.

There are several red flags to look for, such as “charities” that insist you wire cash or who put pressure on you to donate immediately. The key here is to be very wary of anyone soliciting for donations on behalf of a recent and highly publicized event. If you get an email asking you to support a victim fund of a recent disaster, it’s likely a scam, as most charities don’t solicit donations via email.

Why it works: People tend to want to help others in times of need and this scam preys on the kindness of strangers during a crisis.

How to avoid it: If someone calls you on the phone soliciting donations, tell her nothing. The best bet is to not entertain her call at all because, frankly, it’s just too much work and too difficult to accurately determine whether they’re legitimate. If you feel in the giving spirit in the wake of a tragedy, be safe by proactively contacting a charity you have a relationship with, or you know to be reputable.

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The Breaking News Scam

“Click here to see live video of…” As awful as it sounds, human beings are often drawn to video — however jarring and disturbing — of tragic events, such as the Twin Towers falling or the Boston Marathon explosions. Scammers use this natural curiosity to their advantage by emailing a link that promises to show you “live video” of an event. The link will take you to a website that looks like YouTube or another legitimate website where you’ll see the video. But what you won’t know is that when you get there, you’ll load malicious HTML, which targets vulnerabilities in certain browser plugins. If your browser is vulnerable, the malware will be silently installed in the background and you’ll never realize it. Your machine will be infected and once that happens your personal data could be at risk or your computer can be used to send spam or perpetuate the malicious code.

Why it works: This scam takes advantage of the curious nature of human beings and the timing of newsworthy events.

How to avoid it: Going back to phishing, it’s always safest to NEVER click on links embedded within the body of an email, especially if it comes from someone you don’t know.

Whether they’re high-tech or low-brow, and regardless of their form, scams are all about separating you from your money and scammers will stoop to the lowest of lows in their quest to get the job done. Foil them at every turn by being extra cautious, heeding the advice above and listening to your gut if something doesn’t seem right.

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