The Federal Trade Commission received more than 2.1 million reports of fraud from consumers in 2020. This amounted to losing more than $3.3 billion, a substantial increase from $1.8 billion in 2019. The global pandemic has contributed to this sharp increase, highlighting the importance of remaining aware and practicing ways to avoid financial scams. 


Common Types of Financial Scams

There are numerous types of financial scams. These scams can use a range of methods, platforms, and strategies to access your personal information or to request needed funds. Common financial scams include the following: 

  • Bank scams. Several types of bank scams involve gaining direct access to your bank account information. People can email or call you impersonating a bank representative. Via email, they can request your login information for your online banking account, or on the phone, they may ask you enough questions to learn your account information. 
  • Tax scams. A few common tax scams include impersonating a representative from the IRS or filing a tax return in someone else’s name and collecting the tax refund. Another tax scam involves filing a W-2 form using someone else’s Social Security number as well as other personal information. This allows the person committing fraud to have the victim’s income forwarded to their bank account. 
  • IRS scams. One of the most common types of IRS scams involves receiving a phone call by a person pretending to be an IRS representative. They claim you owe back taxes or a debt to the IRS and must pay immediately.  
  • Credit card scams. This type of scam gives the person committing fraud access to your credit card information. This can happen in a few ways including a person calling and pretending to be a representative from your credit card company’s fraud department. They claim a suspicious purchase has been made using your credit card and will ask for specific information (card number, security code, etc.). There are also ways people can obtain your credit card information online which has increased due to online shopping. 
  • Email scams. This includes fraudsters sending you an email posing as a financial institution or other organization and sending a fake link that asks for personal information. The links could include malware that breaks into your computer’s security, giving them access to your information. 
  • Charity scams. This involves making up a charity and requesting donations. This is especially common after a natural disaster or tragedy which allows people to capitalize off of people wanting to help. 
  • Pyramid schemes. A pyramid scheme is an illegal business model that works by constantly recruiting people (based on providing a service or selling a product) and using their investments to pay people higher up.
  • Ponzi schemes. A Ponzi scheme is a type of investment scam that uses the investment money people provide to pay off other investors. Fraudsters claim to invest people’s money, often promising high returns but use the funds to pay off older investors.  

These scams are among many that result in security breaches and financial loss. There are steps you can take and safety measures you can practice to best avoid these types of scams. 


Tips to Avoid Scams 

To protect yourself and prevent a financial scam, implement the following tips:  

  • Recognize the signs. There are common signs that can help you identify a potential scam. This includes someone contacting you posing as a representative from an organization you are familiar with – your banking institution, the IRS, cable or utility company, etc. The fraudster claims there is a problem or a prize, requiring you to provide personal information. They present it as urgent and pressure you to act immediately and tell you to pay in a specific way. 
  • Conduct research. Take the time to look into the message and information you’ve received. This could be as simple as double-checking the email address, researching the organization, or the name of the person contacting you, etc.  
  • Block messages. Add your number on relevant do-not-call lists which prevents unsolicited phone calls. Also, filter your emails so spam messages do not reach your inbox. 
  • Guard personal information. Be extremely cautious about providing any personal information. It is helpful to hang up any phone calls or not respond to emails and simply call the customer service phone number associated with the institution contacting you. 


These tips are helpful ways to protect your personal information, reducing the risk of experiencing a financial scam!