With digital wallets and auto-fill, it’s never been easier to automatically share your financial information with a new website or platform.
But any time you make purchases online or input your personal or financial information into a new website or app, you take a risk that could cost you in the long-run. Consumers reported losing nearly $8.8 billion to fraud in 2022—an increase of more than 30% over the previous year—according to data from the Federal Trade Commission (FTC).
This uptick in fraud-related losses highlights the importance of being vigilant and taking the proper precautions online so that your personal information and financial health aren't compromised.
Consumers are paying the price
According to the FTC report, imposter scams (fraudsters posing as legitimate businesses), online shopping scams, and investment scams were some of the top culprits of the increase in fraud. When consumers fall for these kinds of traps, they not only pay a hefty price through the losses they incur, but may also compromise their personal and financial information—setting themselves up for fraud and identity theft in the future.
Last year, there were over 1.1 million reports of identity theft received through the FTC’s IdentityTheft.gov website. And while you might be able to recover financial losses through protections offered by your financial institution, protecting your personal and financial information once it’s fallen into the wrong hands can be challenging. That's especially because you may not catch this type of fraud until the damage is already done to your credit.
“When we consider how fraud can affect one’s credit score, the primary concern is identity fraud," says Stu Bradley, senior vice president of fraud and security intelligence at software company SAS. He explains that an identity thief can use stolen information to apply for credit in your name, and the hard inquiries that result from those applications alone can negatively impact your credit scores. "Once the fraudster has successfully opened an account, the spending spree begins," Bradley adds. "It could be months before you realize anything is amiss. In the meantime, you’ve amassed a chunk of debt and a number of missed payments that wreak further havoc on your credit scores."
Bradley reiterated that even if you do catch the signs of fraud, correcting the issue could be a lengthy battle. “While you are not ultimately liable for the fraud, it typically takes months and untold hours of duress to recover a stolen identity and correct erroneous data captured across the credit bureaus.”
Recognizing these common red flags can help protect your finances
There are several common tactics that scammers can use to get their hands on your personal and financial information. Knowing their tried-and-true methods could help you stay vigilant and avoid falling into any traps if you do become the target of a potential scam.
These might include:
- Phone calls or text messages from someone posing as a representative from your financial institution, a government entity, a charity, etc.
- Being contacted about a prize for a contest you didn't enter, or an overdue payment for a bill you don’t recognize
- A debt collector asking for payment for a debt you do not recognize
- Someone cold-calling you about a debt relief, foreclosure relief, or mortgage loan modification program
- Phishing emails that may also contain a harmful links
“We like to think it could never be us, but the sad truth is that anyone can fall victim to identity fraud,” says Bradley. “Fraudsters love the anonymity of digital interacting and transacting. It makes it easier for them to impersonate their victims—and easier to trick their victims into unwittingly divulging personal information.”
5 tips for protecting your financial information from scammers
While there’s no surefire way to prevent fraud, there are ways that you can better recognize scams and protect your personal information.
- Don’t click on any suspicious links, email attachments, or downloads. Scammers may try to gain access to your personal information by sending you links or attachments that ask you to submit additional personal information or claim a prize after you’ve made a purchase. Don’t interact with any of these phishing attempts. If you have questions, or are unsure if the message you’re receiving is real, contact the merchant directly through a verified contact number or email.
- Enable multi-factor authentication (MFA) on all of your accounts. This setting requires a user to provide more than one password or form of verification in order to log into your financial or personal accounts. That way, even if scammers get their hands on one piece of your personal info, they’ll have to jump through a few more hoops to do anything with it.
- Be sure to research companies, businesses, and charities before making purchases or donating. Before you make a purchase or donation, do some research on the company first. A quick search online could help you learn more about the company and catch any reviews about potential scams.
- Hit “ignore” on spam calls. If you don’t recognize a number and aren’t expecting a phone call, you might want to avoid taking it. Scammers often call you from a phone number with your same area code to gain your trust and make themselves seem more legitimate. Your cellphone may also warn you ahead of time with a “scam likely” warning.
- Watch out for strange payment methods. If you receive a message about a missed or late payment that requires you to pay in the form of a gift card, money order, or wire transfer, you’re likely dealing with a scammer. Be sure to go straight to the source and ask your service providers for your most recent account statement to determine if you’re actually behind and by how much.
The takeaway
Being a victim of fraud can not only wreak havoc on your finances in the short-term, but scammers are capable of causing damage that can take years to recover from. Knowing the key warning signs and common strategies used by fraudsters can help you avoid becoming the victim of a scam.
If you are targeted by a scam, be sure to take action as soon as possible by filing a report with the FTC and your local law enforcement.
