How to Help Protect Yourself From Fraud: What to Know

Key Takeaways

• Fraud often targets the young and old, who may be more vulnerable.
• Common types of financial fraud include Identity theft, credit card fraud, elder fraud, imposter scams, romance fraud, and phishing.
• Signs of fraud include unauthorized charges, missing items, requests for money from strangers, suspicious account activity, and declarations of love from someone you haven't met.
• Prevent fraud by not sharing personal information, monitoring statements, and credit card receipts, using secure websites, and being cautious about those you interact with online.
• If you are a victim, contact agencies like the FTC, police, major credit bureaus, and banks to report the fraud and protect yourself.

Fraudsters continually find sophisticated ways to access people's money, often targeting older individuals and threatening their life savings.

Thankfully, you can take action to protect yourself. The first step is knowing what kinds of fraud could help you spot potential scams. Here's a look at the most common financial frauds and tips for prevention.

The 6 Most Common Types of Financial Fraud

In 2023, there were 2.6 million fraud reports. The U.S. government handles millions of fraud cases annually.¹ One fraud report is increasing, and protecting yourself and your loved ones requires awareness.

Here are six common types of financial fraud and tips for identifying and preventing them.  

1. Identity Theft

Identify theft, which happens when someone steals your personal information, often online.

An identity thief may use your Social Security number and other details to steal money, charge items to your credit card, claim your Social Security benefits, and open new financial accounts.

Some Signs of Identity Theft:

• Receiving bills for purchases you didn't make or services you didn't use.
• Suddenly, you are not receiving expected bills in the mail or getting new statements for accounts you didn't open.
• Unauthorized charges on your bank or credit card statements.

How to Prevent Identity Theft:

• Don't share your personal information online, including via email or social media.
• Regularly review your bank account and credit card statements for inconsistencies or unrecognized purchases.
• Consider an identity theft monitoring service that sends you alerts and offers identity theft protection.

If you become a victim of identity theft, act quickly to minimize damages. Use an online security center and consult with a security expert. Staying vigilant and informed is an excellent defense against persistent identity thieves.

2. Credit Card Fraud

Closely related to identity fraud is credit card—or debit card—fraud. It occurs when a scammer obtains your credit card information and makes unauthorized purchases.

If you don't use your cards often, this fraud might go unnoticed for months. By the time you realize it, you could owe thousands of dollars. Credit card fraud may be difficult to remedy, and it could affect your credit score or even your business credit score.

Some Signs of Credit Card Fraud:

• Lower available credit balance, or your card is declined when you try to use it.
• Notifications that your password or credit card PIN has been changed or that a purchase has been made without the card being present.
• Unrecognized charges on your credit billing statements.

How to Prevent Credit Card Fraud:

• Ensure the website is secure when paying for items online. Look for "https" (rather than just "http") at the beginning of the URL, along with a lock icon that shows the page is protected.
• Review your credit card statements for charges from locations you don't frequent.
• Sign your cards as soon as you get them, and consider taking only the card you need when you leave home.
• Be cautious when filling out credit applications and sharing your credit card information only with trusted credit card issuers. 

Protecting your credit card PIN and regularly monitoring your accounts could reduce the risk of credit card fraud.

3. Elder Financial Fraud

Elder financial fraud happens when someone pretends to act in the best interest of an older person but scams them for their money, assets, or possessions. Perpetrators could include financial, legal, or accounting professionals, caregivers, and even family members. 

In a report released by the Federal Bureau of Investigation (FBI), 24% of the reported fraud losses in 2023 involved people over 60 years old,² totaling approximately $3.4 billion. Older victims typically face higher financial losses from fraud because they may not even realize they are being scammed due to poor health or reduced mental capacity. 

These scams may go unnoticed because they often involve subtle or slow resource drains. Fraudsters may also access sensitive documents or bank and retirement accounts that the victim doesn't closely monitor. 

Some Signs of Elder Financial Fraud:

• Noticing missing items from around the house.
• Sudden changes to important documents, like a will, or they fall for a life insurance policy scam.
• Your loved one says they've given someone access to their bank, credit card info, or retirement accounts.

How to Prevent Elder Financial Fraud:

• Get to know your loved one's caregivers and watch for the signs of theft or fraud.
• Consider having two people manage your loved one's finances to ensure both must approve significant changes or charges.

4. Imposter Scams

Imposter scams involve fraudsters pretending to be someone they're not, like government officials, fake charities soliciting donations, or claiming you've won something. These scams could occur online, in-person, over the phone, or through the mail, making them difficult to identify.

A clear red flag is when they ask for personal information or money without providing precise details or documentation.

Some Signs of Imposter Scams:

• Unsolicited requests from a seemingly official organization say you have an urgent bill due or need to change your online account.
• Notifications that you've won money or a prize through a lottery or grant but must pay a fee first.
• Persistent requests for money from someone claiming to be from a charity or utility company you don't recognize.

How to Prevent Imposter Scams:

• Confirm any claims about unrecognized bills or prizes directly with the organization using their officially listed contact information.
• Don't be afraid to hang up, ignore the letter/email, or ask the visitor to leave.
• Don't rely on caller ID or spam filters to screen scammers; they may use false or misleading names, logos, and URLs.

5. Romance Fraud

Despite all the cautionary tales, romance scams continue to flourish. Many scammers target older singles and divorced or widowed individuals, believing them to be vulnerable, and ask for money or other financial or personal information. When they get it, they disappear. Given the popularity of online dating, it's easier than ever to connect unwittingly with scammers. According to the FTC, romance scams make up nearly a quarter of all frauds that originate on social media.³

Some Signs of Romance Fraud:

• The person only wants to communicate online despite seeming invested in the relationship.
• They ask for money to travel to visit you, then cancel plans after getting the funds.
• They quickly declare their love, hoping you'll put your guard down and trust them.

How to Prevent Romance Fraud:

• Be cautious about connecting with someone far away, especially outside the country.
• Don't share personal financial information online with someone you don't entirely know or trust.
• Beware of financial requests for travel or emergencies. 

6. Phishing

Phishing scams involve fraudsters pretending to be a legitimate entity to trick you into providing your personal information or money. These scams will often appear as text messages, emails, or websites that look like they came from a reputable organization, which makes them hard to detect. 

A typical red flag is that these communications create a sense of urgency, pressuring you to act quickly without verifying that the content is legitimate. 

Some Signs of Phishing Scams

• You receive an email or text message claiming to be from a trusted source, like your bank or a popular website, asking you to confirm your details or answer common security questions. 
• The communication includes a link that directs you to a legitimate-looking website but asks for sensitive information such as passwords or credit card numbers. 
• You receive an urgent notification that your account has been compromised and that you must take immediate action to avoid penalties.
• You notice suspicious activity on your mobile banking apps or bank statements after receiving such communications.

How to Prevent Phishing Scams

• Verify the source of any email or message requesting information by contacting the organization directly using their official contact information. 
• Avoid clicking links or downloading attachments from unsolicited emails or messages, especially if they seem suspicious.
• Use security features like two-factor authentication (2FA) and update your software to protect against phishing attacks. 

What to Do if You're the Victim of Financial Fraud

If you suspect yourself to be a victim of identity theft or you've been the victim of another type of fraud, you can take immediate action to protect yourself. Here are a few steps to consider:

• Check with the appropriate government agency. The FTC runs IdentityTheft.gov and ReportFraud.ftc.gov, which provide information on identifying and reporting fraud.
• Contact your local police department. You may want to file a report to get it on record, even if the scam was online. Credit card companies or credit bureaus may require this step before they get involved.
• Request holds on your bank account and credit cards. Change all your passwords and set up facial recognition for any financial institution accounts you access online. Use strong passwords and update them every few months. 
• Place a fraud alert with the credit reporting bureaus. This will help protect your credit score if the identity thief uses your identity to create new accounts or misuse existing finances. Review your bank and financial statements for suspicious activity to catch potential fraud early. 

Resources to Get Help Against Potential Fraud

You don't have to worry about fraud on your own. These resources could help you identify scams and assist you if you think you've been a victim. 

• AnnualCreditReport.com. The three major credit bureaus allow you to access your report for free once every year. You could use this organization, which is authorized by federal law, to request them.⁴
• IdentityTheft.gov. Run by the FTC, this site lets you report identity theft and provides advice and resources.⁵
• ReportFraud.ftc.gov. This is the FTC's primary site for reporting fraud, scams, and bad business practices.⁶
• Consumer Financial Protection Bureau. You could use this site to learn more about fraud and file complaints.⁷
• FBI elder fraud site. This site will help you spot different types of financial fraud and has tips on reporting scams.⁸
• AARP Fraud Watch Network. This resource may make you aware of potential frauds happening in your area.⁹

While you can't guarantee you'll never fall victim to a scam, knowing how to prevent fraud could significantly reduce your chances.

With a little education and practice, you can better protect yourself and reduce your risk. Understanding common financial scams and how people fall victim to them makes them easier to spot and avoid.

Sources

1. Top Frauds 2023 - Federal Trade Commission. https://consumer.ftc.gov/system/files/consumer_ftc_gov/pdf/CSN-1pager-2023-508.pdf
2. Elder Fraud Report 2023. https://www.ic3.gov/Media/PDF/AnnualReport/2023_IC3ElderFraudReport.pdf.
3. Social media: a golden goose for scammers. https://www.ftc.gov/news-events/data-visualizations/data-spotlight/2023/10/social-media-golden-goose-scammers#:~:text=In%20the%20first%20six%20months%20of%202023%2C%20half,love%20bombing%20and%20the%20inevitable%20request%20for%20money..
4. Annual Credit Report. https://www.annualcreditreport.com/index.action.
5. Identity Theft https://www.identitytheft.gov/#/#/#####.
6. Report Fraud. https://reportfraud.ftc.gov/#/#/#########.
7. Consumer Financial Protection Bureau. https://www.consumerfinance.gov/####.
8. Elder Fraud-FBI. https://www.fbi.gov/how-we-can-help-you/safety-resources/scams-and-safety/common-scams-and-crimes/elder-fraud###.
9. AARP Fraud Watch Network Scam-Tracking Map. https://www.aarp.org/money/scams-fraud/tracking-map/?intcmp=AE-SCM-FRD-SUBNAV-MAP##.