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Top 6 banking scams and how to avoid them

Top 6 banking scams and how to avoid them

Scams have become increasingly common, with the Federal Trade Commission data indicating that a total of 2.8 million consumers recently lost around $5.8 billion in banking scams in a year. The banking sector finds newer and better ways to tighten security and protect user data, but it is also important for customers to be vigilant and avoid falling for scamming tactics, especially because money lost in scams is difficult to recover.

1. Overpayment scams
Anyone who owns a business and sells their product or services online would be most vulnerable to such scams. Here, a scammer posing as a genuine customer may pretend to overpay for a product using a counterfeit check or money order, then ask the business to send the difference via wire transfer. Not only will one lose money on the shipped order, but they may also end up paying a fee to the bank for the returned check. To avoid this, one should verify the buyer’s address, name, and contact details. Second, one should reject a check with an amount higher than the selling price of the product or service and accept only traceable online payments.

2. Check-cashing scams
Check cashing scams thrive on one’s compassion. A scammer may request someone outside a bank to encash a check for them since they urgently need cash. The idea is to ensure that an unsuspecting individual deposits a fake check in their account. While the check takes several days to clear, one would have paid cash immediately to the scammer. As the check is counterfeit, the money is held against the account, and tracing the scammer is impossible. To avoid falling for this scam, one should exercise caution while accepting checks from unknown parties and never make any payments or agree to any financial transactions under pressure. One should also avoid cashing checks for strangers.

3. Automatic debit scams
Here, a scammer may contact one via phone, text, or email and get their account number or account routing number, which is basically a code that banks need to direct funds from one bank account to another. Once they get their hands on the routing or account number, scammers can easily transfer money to their bank account or set up automatic payments to be carried out every month, like monthly subscription payments. The best way to avoid automatic debit scams is to not share any details regarding one’s bank account with people over the phone, call, mail, or text if one cannot verify the identity of the person asking for this information. The scammers could claim to be bank employees or any other legitimate business, so one should cross-check their identity with the bank. 

4. Government official imposter scams
This is another common bank scam where a fake government official asks one to pay outstanding taxes or fees on a government service. They may also accuse one of fraud or legal oversight, threaten to take regulatory action, and demand to pay the outstanding debt to a supposed federal agency. All of these may coerce one to make a payment to a fake agency. One should also read and verify every email related to banking or transfer of money in detail, along with the address, fine print, text, and even the language of the email body to recognize phishing attempts. Legitimate emails use have official domains in IDs, ensure clear and professional language, and have no suspicious attachments.

5. Charity scams
Several charity scams start with imposters cold calling people, making heartfelt appeals, and seeking financial help from those willing to give back to the community. Common ways to know if a charity is legitimate is to ask them for organizational details like their EID number, operations, work, reach, impact, and such. One should also verify the charity’s name word-for-word on websites like Better Business Bureau (BBB), Charity Watch, and Charity Navigator. At times, the given names may resemble other popular charities. One should steer clear of any organization that is evasive about delving into details and asks to make payments through untraceable sources, like cash, wire transfers, or gift cards.

6. Fake award or job scams
Some of the most common employment scams are regarding freelance and work-from-home opportunities, with fake recruitment agencies reaching out and asking for personal details of a potential candidate. A scammer may fake the selection of a candidate and set up an online interview through a specific messaging service. The service may require the candidate to input their personal details, which can lead to scammers gaining unauthorized access to their financial accounts. Scammers may also demand an up-front fee or commission in exchange for a job. Alternatively, scammers may fake a contest and claim that an individual has won some prize. To receive it, they may ask one to cover the shipping cost and processing fees. These scams usually happen via emails or online job search platforms, so it is important to exercise caution in all communications with potential employers. To protect oneself from these scams, one should research the legitimacy of job opportunities and be wary of the ones with unclear or dubious information. Genuine employers follow standard hiring processes and do not demand sensitive information.

If one gets caught up in a banking scam, they should immediately report the case to the authorities and notify the financial institution.

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