We have all probably been contacted in online or telephone scams, and we may have friends who have lost thousands of dollars after falling for a scam. One of the easiest ways to tell if you are being targeted is to think about how you are being asked to transfer your funds.
How does the scammer want that money sent? It has to be a way that allows them to collect right away without you backing out. It also has to be hard to trace. Remember that your funds can be instantly transferred electronically around the world. There are five different methods commonly used by scammers to make those funds transfers.
Gift cards are currently the preferred method used for all types of scams. You are instructed to buy one or several cards worth hundreds of dollars from a major retailer like Amazon or Walmart. You then read the code numbers on the back of the cards to the caller. Once you’ve done that, the swindler can use the codes to buy merchandise — including other gift cards with lower denominations. That makes the payment untraceable.
Similar to a gift card, scammers also ask for prepaid debit cards. A prepaid debit card is a reloadable debit card like Visa which is sold at major retail stores. It has a serial number that is used to transfer funds from your bank account to the card and is used like a traditional checking account debit card. The consumer can designate how much money to load onto the card at any given time. Money on the card can be transferred to another debit card or used to make same-day payments to other companies. If the serial number falls into the hands of a scammer, the scammer can drain the money you have loaded onto the card.
In the past the most common method used by a scammer has been the wire transfer. Your bank, Western Union, or MoneyGram sends funds to another account number for a fee. The transfer can’t be cancelled once it is sent. The one exception is if you make an international transfer and then contact the company to cancel it within a half-hour, and that only works if the wire hasn’t been picked up or deposited yet.
Money transfer apps like Venmo, Cash, or Zelle are commonly used by most young people today. You can move funds easily to another person who has an account. The apps are designed to be used by people who know and trust each other, and there is no consumer protection if you send money via one of them to a person who asks you to share your account number. Because you authorize these payments, you will probably not be able to get your money back.
Most of us don’t have cryptocurrency accounts like Bitcoin, but they are becoming more common. Victims are instructed on how to open an account and told to buy a fraction of a Bitcoin, for example, in increments of as little as $10. Transactions take a few minutes and are person-to-person, without any bank or regulating body. When the crook gets your money, it’s gone. More cryptocurrencies are being developed all the time.
Last week’s column was about the Grandparent Scam where you receive a call or message from a “grandchild;” a catastrophe has happened, and they need money fast. There are several other scams we need to watch for and next week’s column will explain how more of them work.
Billions of dollars are lost to scammers every year. If you think you are a victim of a scam, contact the company that sent the money and see if they will reverse the payment. (They probably won’t, but it doesn’t hurt to try.) Let the police department know, as scammers usually target an area for a while and then move on. Finally, contact the Federal Trade Commission. When you report a scam, the FTC can use the information to build cases against scammers, spot trends, educate the public, and share data about what is happening in your community. If you were scammed, report it to the FTC at ReportFraud.ftc.gov.