Fraud is when someone uses deception for personal or financial gain. By far, the most common type of fraud is the imposter scam, where someone represents themselves as someone they are not to extract money or personal information from their victim.
Consumers lost a total of $5.8 billion to fraud in 2021, $2.33 billion of which was to imposter scams alone, according to the Federal Trade Commission (FTC). The biggest financial losses per consumer came from investment-related scams, where the median loss was $3,000. The most common way to contact potential victims was by phone.
|The Most Common Types of Fraud
|Type of Fraud
|Number of Reports
|Median Amount Lost
|Total Amount Lost
|Online shopping and negative reviews
|Prizes, sweepstakes and lotteries
|Business and job opportunities
|Telephone and mobile services
|Travel, vacations and timeshare plans
|Foreign money offers and fake check scams
Source: Federal Trade Commission (FTC) Consumer Sentinel Network Data Book 2021
So what, exactly are these scams? And how can you protect yourself?
1. Imposter Scams
Imposter scams involve someone misrepresenting themselves. Those can take the form of romance scams, phone calls or texts purportedly from Social Security or law enforcement, or a "family member" in distress and in need of cash, quickly. One giveaway that it's a scam: You are asked to pay in gift cards. There were nearly a million reports of imposter fraud in 2021, with a median loss of $1,000, according to the FTC.
How to Protect Yourself From Imposter Scams
Practice a healthy skepticism whenever you get a distressing call, and take a moment to double-check to see if the person you are in contact with is legitimate. In a situation you believe is an emergency, or if you are frightened or scared, it is tempting to make rash decisions, and scammers know that. It's better to take a breath and, if you can, call someone to confirm. A legitimate caller will understand and accommodate your wish to confirm that the call is genuine.
2. Online Shopping Scams
Online shopping scams often take the form of fake retail sites or fake ads embedded in real retail sites. They are also becoming increasingly common on social media: Ads you see on Facebook or Instagram, for example, may be from legitimate retailers, or they may not be. Online shopping scams may also include fake reviews.
How to Protect Yourself From Online Shopping Scams
Prices that seem to be good to be true may very well be. There are several steps you can take to identify a fraudulent retailer and keep yourself safe from this type of scam:
- Check return policies before ordering anything, and do an online check for the name of the business and "complaints." (Legitimate businesses may also have complaints, but a large number could suggest a problem.)
- Check for a URL starting with "https" and a closed padlock icon, and pay with a method, such as credit cards, that includes consumer protection.
- Be skeptical of reviews. A review that says something good about the business isn't necessarily legitimate.
- Check warranties and return policies before ordering.
3. Prize, Sweepstakes and Lottery Scams
These scams start with great news: You've won a prize. But there's a catch: You need to give someone money or an account number before you can claim the prize. (An account number can allow a criminal to siphon money out of your account, and money paid to collect your prize is gone forever.)
How to Protect Yourself From Prize Scams
Ignore any emails saying you won a foreign lottery. And if you didn't enter a contest in the first place, know that you didn't win. Real sweepstakes are free, by chance and almost always require you to enter to win.
4. Internet Service Scams
These scams typically come as an offer of "tech support." You may get a warning that a virus has been detected on your computer and a demand to follow a link to get help eradicating it. Or you may get a phone call from someone who says they are a tech support agent and need to briefly take over your computer to fix a vulnerability. (Their goal is to gain access to your computer to collect personal and/or financial information or to add malware.)
How to Protect Yourself From Internet Scams
Keep in mind that you are the one who should be initiating calls or emails to protect your computer. Keep computers and virus protections up to date. If you do need help with your device, seek out a professional yourself.
5. Job Opportunity Scams
Business and job scams collect information and/or money from you, often for jobs that do not exist. These can include fake websites that look like websites of actual companies.
How to Protect Yourself From Job Opportunity Scams
The FTC suggests doing an online search for the company, hiring manager and the word "scam," "complaint" or "review." You can also navigate to the company doing the hiring and check the job openings advertised on their site. You should not have to pay to see job listings or to accept a job offer.
6. Cellphone Service Scams
These scams involve a criminal using your SIM card or a clone to port your phone number to one controlled by the criminal. This would also mean that the text messages sent by financial institutions to verify your identity would now go to the criminal.
How to Protect Yourself From Phone Service Scams
Get a PIN or a password to verify your identity when calling about your account. Some financial accounts also offer voice verification. You can also enable email and text notifications of changes in your account. If you receive a notice of a change you didn't authorize, contact the business immediately.
7. Investment Scams
Investment scams offer victims "secrets" to getting big returns with little risk in the financial or real estate markets. Many start off with a free seminar.
How to Protect Yourself From Investment Scams
Do your own research and verify any claims. (And consider this: If they really had the easy secret to making millions with little risk, why are they selling these secrets to you instead of making millions?)
8. Health Care Scams
These scams tend to follow headlines, but the bottom line is that a scammer wants your Medicare number, health insurance number or Social Security number. The pretext varies with the news: For example, COVID-19 tests and vaccines were big, and scams increased during sign-up deadlines for insurance.
How to Protect Yourself From Health Care Scams
Do your own research to confirm. Take time to talk to someone you trust. Also, know that caller ID can be spoofed. Don't rely on it to verify the identity of a caller.
9. Vacation and Timeshare Scams
Some of the biggest timeshare scams come when you or someone else tries to get rid of a timeshare. Like many other scams, they include (false) guarantees that you'll be able to do what you are hoping, and that you'll make money, or at least lose less. These can also include buying foreign timeshares or property.
How to Protect Yourself From Vacation Scams
Be sure you understand how your timeshare agreement works, and that you know how to exit a plan if you decide to do so. Also know whether a timeshare will be inherited, which could be a financial burden.
10. Fake Check Scams
These scams involve someone sending you a check with a request—to be a mystery shopper, to buy gift cards or to send some of the cash overseas, for instance. They have a cover story about why, but they will send you more than is actually needed and request that you send back the overage—or even keep some of it for your trouble.
Banks have to make deposits available within days, but uncovering a fake can take longer than that. Once the check is determined to be a fake, the bank will claw back the funds from your account. These scams work because people see the money has been deposited, and they assume that means the check was good.
How to Protect Yourself From Check Scams
Accept checks only from people or businesses you know and trust. Never cash a check for more than you expected payment for.
The Bottom Line
Scammers prey on our fears, vulnerabilities and sometimes our desire for a great deal or more money. A hallmark of a scam is urgency—criminals want you to make a decision now, and without a great deal of thought or taking time to consult people you trust.
In addition to losing money, which can be difficult or impossible to recover, victims may lose personal data, which could make them vulnerable to identity theft or medical identity theft. In this way, the care you take in revealing personal information and account numbers can go a long way in protecting you.
If you believe you may have engaged with a fraudster, be sure to report it as quickly as possible.
While there is no fail-safe way to prevent identity theft, there are ways to detect it early, when it's easier to address. Experian offers free credit monitoring that can alert you when someone uses your personal data to apply for credit, as well as identity theft monitoring.