How to Avoid Financial Scams

Remember that Nigerian prince email scam from the early 2000s?

Modern financial scams have evolved far beyond such laughable and obvious attempts, though you can still find telltale signs like bad grammar and spelling mistakes.

As scam tactics have become more sophisticated and difficult to spot, their financial impact continues to grow. Nobody’s immune: Scammers target people from all walks of life.

Your financial and emotional well-being depends on learning how to avoid financial scams. When you learn to recognize the tricks scammers use and how to stop them, you’re less likely to lose your hard-earned money.

In this article, we’ll explore the current state of financial scams, identify the most common types, and provide practical strategies to help keep your money safe. We’ll also give you guidance on what to do if you suspect you’re a victim of a financial scam.

Financial Scams: What You Need to Know

A financial scam is a deceptive scheme designed to trick you into giving up money or personal information. Thanks to the internet, these scams are easier and more profitable than ever. Here’s why:

• Global reach: Scammers can contact thousands of potential victims worldwide. 
• Anonymity: The internet allows fraudsters to hide their true identities and locations.
• Convincing imitations: Technology makes it easy to create fake websites, emails, or caller IDs that appear legitimate.
• Less personal interaction: Without face-to-face contact, it’s harder to spot deception.

Americans lost over $12.5 billion to fraud in 2024—a 25% increase from the year before, according to the Federal Trade Commission (FTC). 

And the FBI’s Internet Crime Complaint Center (IC3) received more than 800,000 scam complaints in 2023. Phishing and spoofing—two common cybercrimes—were the most reported, making up more than 37% of complaints. 

Today’s scammers are capable of sophisticated technological deception. They know how to create fake websites that look nearly identical to real ones. They can make phone calls appear to come from government agencies. 

And increasingly, they’re using AI to create deepfakes—false videos, voices, and images that are so convincing, it’s almost impossible to tell they aren’t real.

What’s worse is that scammers are also masters of psychological manipulation. 

A recent study on scam tactics showed that most fraudsters follow a simple but effective formula: First, they make you feel threatened or anxious about something (like suspicious account activity), then they offer you a convenient way to fix the problem. 

The key ingredient? Urgency. Scammers insist you must act immediately: Your account will be closed, you’ll be arrested, or you’ll miss out on a once-in-a-lifetime opportunity. This artificial time pressure prevents you from thinking clearly or verifying their claims. 

Scammers often target specific groups who have the potential to be more susceptible to their deception:

• Seniors are frequent targets of Social Security scams, with callers claiming benefits have been suspended or accounts have been compromised.
• Young professionals often encounter investment scams on social media, including cryptocurrency schemes and fake business opportunities.
• College students are vulnerable to scholarship scams and fraudulent student loan forgiveness offers.
• Immigrants are targeted with threats about visa or immigration status issues that require immediate payment to resolve.

Beyond the financial losses, these scams take an emotional toll. Victims often experience shame, embarrassment, and lingering anxiety—emotional effects that can last for months or even years.

Common Types of Financial Scams

Recognizing how to avoid financial scams can help you identify potential threats and protect your financial well-being. Here are some of the most common scams to look out for:

Phishing, Smishing, and Vishing

Crooks pretend to be trusted companies or organizations that use online scams to trick you into sharing your personal information or putting your money at risk:

• Phishing uses fake emails that look like they’re from real companies, agencies, or organizations (e.g., a message from Facebook alerting you of “unusual sign-in activity” on your account).
• Smishing uses text messages to collect payments or personal information (e.g., you owe money to a toll road collection service).
• Vishing uses phone calls where someone pretends to be from your bank, the government, or a tech company.

Beyond trying to get your personal details, scammers might tempt you to click on harmful links, download fake attachments, or install software that can take over your device and steal your passwords or confidential information.

A common example of phishing is an email that looks like it’s from your bank saying there’s a problem with your account. It asks you to click a link to “fix the issue.” The link takes you to a fake website that steals your username and password, or it might download harmful software that can capture everything you type.

Quick tip: Never click links in emails you weren’t expecting. Instead, open your web browser and type in the company’s website address yourself.

These attacks come in all forms and are constantly evolving, but the scammers’ goal is always the same—to steal your money or personal information and use it for their own financial gain.

Online Shopping Scams

Online shopping has given rise to fake shopping websites and bogus marketplace listings. Watch out for:

• Products with low prices that seem too good to be true.
• Websites that look almost like the real deal but appear slightly off (like “Amazzon.com” or “Walmaart.com” instead of the real URLs, blurry logos, or different colors than the real site).
• Sellers on Amazon or Facebook Marketplace with no history or bad reviews.
• Items that never arrive after you’ve paid.

Quick tip: Before buying from a website you’ve never visited before, search for online reviews (somewhere other than the website) and check that the web address starts with “https” (the “s” means it’s secure, which shows the site protects your payment information). 

When buying from online marketplaces, check the seller’s history and what other buyers say about them.

Investment Scams

Investment scams take advantage of people looking for quick and easy ways to make money. These scams often promise big profits with little to no risk. Watch out for:

• Ponzi schemes where early investors get paid using money from newer investors.
• Pump and dump tricks where scammers hype up a stock, then sell all their shares at once, causing the price to crash and leaving later investors with big losses.
• Cryptocurrency scams where someone promises to make you money or offers “exclusive” investment opportunities if you send them your cryptocurrency.
• Fake real estate deals for properties that don’t exist or aren’t as advertised.

Quick tip: Investing involves some risk. If someone guarantees you’ll make lots of money with no chance of losing any, walk away. Take your time to look into any opportunity before investing.

Romance Scams

Romance scams target people looking for love or friendship online. The scammer spends weeks or months building a relationship with you, then suddenly has a crisis and needs money. Common emergencies include medical bills, legal troubles, being stranded while traveling abroad, or needing money for a plane ticket to finally meet you.

These online scams are especially harmful because they play on your emotions. Victims often keep sending money even when friends and loved ones raise concerns because they truly believe someone they care about—and who cares about them—is in need.

Quick tip: Be careful with online relationships where someone moves quickly but always has reasons why you can’t meet in person. Talk to a friend about any new online relationship, and never send money to someone you haven’t met face-to-face.

Social Security Scams

Social Security scams usually involve calls, texts, or emails claiming there’s a problem with your Social Security number or benefits.

Scammers might make it look like they’re calling you from a legitimate organization, in a practice known as “spoofing.” In a popular Social Security scam, callers spoof the agency’s phone number and claim they’re contacting you because your Social Security number has been suspended due to suspicious activity or because you’ve committed a crime. 

Scammers will try to scare you with threats—like saying you’ll be arrested or lose your benefits—unless you “confirm your information” or pay them right away. Another red flag: They’ll often request payment through gift cards or wire transfers.

Quick tip: Government agencies like Social Security or the IRS don’t generally call people out of the blue. If you get a call like this, hang up and call the agency yourself using their official phone number. Social Security has a fraud hotline at 1-800-269-0271.

Red Flags to Spot a Financial Scam

Ever had a gut feeling that something just wasn’t right? When it comes to recognizing how to avoid financial scams, that instinct is worth listening to. Here are some warning signs to pay attention to.

Unsolicited Contact

Legitimate organizations rarely reach out unexpectedly to request personal information. 

If you get a call, email, or text claiming to be from your bank, a government agency, or a company you do business with, be suspicious—especially if they ask for personal information.

For example, Amazon will never call you unprompted about a problem with your account. Similarly, the IRS typically initiates contact through postal mail, not phone calls or emails.

Requests for Personal Information

Be cautious when anyone asks for sensitive personal details, especially:

• Social Security numbers.
• Bank account numbers.
• Credit card information.
• Passwords or PINs.
• Home addresses.

Legitimate organizations will never ask for passwords or PINs via email or phone unless you’ve previously set them up with the company yourself (e.g., your cell phone provider might ask for an account PIN to verify your information).

High-Pressure Tactics

Scammers create a false sense of urgency to make you think you have limited time to consider their offer or to prevent you from checking things out. They might claim:

“This offer expires in the next hour!” “You’ll be arrested if you don’t resolve this immediately!” “Your account will be permanently closed if you don’t verify your information now!”

No matter how urgent the situation may seem, take your time to think things over. When someone pushes you to “act now,” they’re usually trying to keep you from thinking clearly or seeking advice from trusted sources.

Unrealistic Promises

If something sounds too good to be true, it probably is. Be wary of:

• Investment returns that outperform historic market averages.
• Guaranteed success in volatile markets.
• Exclusive opportunities.
• Free products or services that usually cost money.

Legitimate financial opportunities involve risk and reasonable returns. Anyone promising extraordinary gains with minimal risk is likely running a scam.

Unusual Payment Methods

Pay attention to how you’re being asked to pay. Scammers typically prefer payment methods that are:

• Difficult to trace.
• Hard or impossible to reverse.
• Not commonly used for legitimate business.

Guidance from the Federal Trade Commission warns consumers to be especially cautious if someone asks for payment using:

• Gift cards (especially Apple, Google Play, or store cards like Walgreens or Target).
• Wire transfers.
• Cryptocurrency.
• Money orders.
• Cash or checks sent by mail.
• Peer-to-peer payment apps like Venmo, Cash App, or Zelle (especially when sending money to people you don’t know).

This doesn’t mean that all payment requests via these methods are illegitimate, but just be extra cautious if they don’t accept common payment methods like credit or debit cards.

Grammar and Spelling Errors

Poor grammar and spelling mistakes often indicate online scams, particularly in emails and text messages pretending to be from established organizations.

Watch for:

• Awkward phrasing or unusual word choices.
• Multiple spelling or grammatical errors.
• Inconsistent formatting.
• Unofficial email addresses (like amazon-support@gmail.com instead of name@amazon.com) or websites (like “paypal-secure-login.com” instead of “paypal.com”).

If you see these or other odd signs, chances are the communication is fake. Many scammers operate from countries where English isn’t the primary language, which is why their messages often contain errors.

Protecting Yourself From Financial Scams

Now that you know the warning signs to watch for, let’s talk about more ways to avoid financial scams.

Remain Skeptical

A healthy dose of skepticism is your first line of defense. You don’t have to be paranoid, but stay alert and evaluate unexpected communications with caution.

Always verify before you trust. If someone contacts you claiming to be from your financial institution, hang up and call the official number on the back of your debit or credit card. 

Take the time to research unexpected offers or claims. A simple internet search for the company name plus “scam,” “fraud,” or “review” can help you verify what you’re being told.

Protect Personal Information

Your personal information is incredibly valuable, and should be treated that way.

To protect physical documents containing sensitive information:

• Use a shredder to dispose of anything you don’t plan to keep.
• Store in a secure location like a locked file cabinet or fire-proof safe.
• Don’t carry them in your wallet—especially your Social Security card.

For your digital security:

• Use strong, unique passwords for all of your accounts.
• Enable two-factor authentication (e.g., a password and one-time sign-in code sent to your phone via text message) whenever possible.
• Regularly update electronic devices and applications.
• Use secure, encrypted connections (i.e., look for “https” in website addresses).
• Consider using a password manager to generate and store complex passwords.

In addition to protecting your information, make sure you don’t easily share it. Don’t type it in just any website, or mention them in a loud voice in public places.

Be Careful With Links

Harmful links are one of the many ways scammers get to your personal information. They trick you into clicking and steal your passwords or install harmful software on your device.

When you get an email or text with a link:

• On a computer, hover your mouse over the link to check that the address matches the company’s actual website.
• Watch for weird URLs like “paypal-secure-login.com” instead of “paypal.com”, or “gooogle.com” instead of “google.com” (this is called typosquatting).
• If you’re not sure, don’t click the link. Instead, open your browser and type in the real website address yourself.

It’s usually safest to avoid clicking links sent in text messages. Unless you specifically requested the message (e.g., asking for a verification code to sign into your bank account), it’s better to be safe than sorry.

Keep Software Updated

Software updates are necessary to protect your security. Updates often include patches for security vulnerabilities and bugs that hackers and scammers can take advantage of.

Make sure to:

• Enable automatic updates for your devices’ operating systems when possible.
• Keep your web browsers updated to the latest version.
• Update mobile apps regularly.
• Maintain current antivirus and anti-malware protection.

Keeping your apps and devices updated helps prevent scammers from hacking your personal information.

Monitor Your Accounts

Check financial accounts regularly to help spot problems as soon as possible. The sooner you notice something is wrong, the faster you can stop scammers and prevent potentially large financial losses.

Here are some ways to keep an eye on your accounts:

• Monitor credit card and bank accounts weekly online. 
• Set up account alerts to notify you about transactions over a certain amount.
• Review bank and credit card statements right away.
• Check your credit report. You can get a free report from each of the three major credit bureaus (Experian, TransUnion, and Equifax) once a year at AnnualCreditReport.com.

Tools like real-time Kudzu Alerts¹ can help you stay on top of your accounts and spot unusual activity.

Report Suspicious Activity

If you suspect a scam, report it. Doing so might help you recover funds and assist authorities in tracking and combating fraud.

Report scams to:

• Your financial institution.
• The Federal Trade Commission at ReportFraud.ftc.gov.
• The FBI’s Internet Crime Complaint Center (IC3) for online scams.
• Your local police department, especially for significant financial losses.
• The three major credit bureaus (Equifax, Experian, and TransUnion) if your personal information has been compromised.

Many victims feel embarrassed about falling for scams, but don’t let that prevent you from making a report. The information you provide helps build evidence against scammers and can prevent others from becoming victims.

What to Do If You’ve Been Scammed

Even the most diligent among us struggle to figure out how to avoid financial scams. If you think you’ve been scammed, it’s important to act quickly:

1. Contact your financial institutions immediately. If you’ve shared account information or made a fraudulent payment, notify your bank or credit card company right away. They might be able to stop payments or transfers that haven’t gone through yet.
   
2. Report the scam. Alert the authorities as soon as possible.
   
3. Change your passwords. If you’ve shared passwords or suspect you’ve been hacked, change them immediately, starting with your email and financial accounts.
   
4. Put a fraud alert on your credit reports. Contact the credit bureaus to initiate a fraud alert, which makes it harder for someone to open new accounts in your name.
   
5. Document everything. Keep records of all communications with the scammer, including emails, texts, phone numbers, and payment information and include it in any reports you file. 

Scammers are very good at what they do. They’ve practiced their tricks on thousands of people and know exactly what to say to sound believable and manipulate people’s emotions.

Getting scammed doesn’t mean you’re an easy target—it just means you ran into a con artist who’s had lots of practice.

Your Best Defense: Knowledge and Vigilance

Understanding how to avoid financial scams is a challenge: Scammers are more sophisticated and harder than ever to spot.

But by understanding how scammers operate, recognizing the warning signs, and being proactive about protecting yourself, you can reduce your likelihood of becoming a victim.

When in doubt, take a step back, do your research, and trust your instincts—if something feels wrong, it probably is.

Our mission is to put financial freedom within everyone’s reach, and that includes freedom from worrying about scams and fraud. Our SpendSense Alerts¹ help you track your spending habits, making it easier to notice suspicious account activity.

Ready to take control of your financial security? Download the Kudzu app today and start building stronger habits with tools designed to help you grow and protect your money.
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