10 Scams to Watch Out ForBuilding Wealth
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Scams have now evolved to the point where most of them aren’t very obvious.
So don’t worry. You’re not stupid or ignorant for being victimized by a scam. We’ve all been there.
There are a number of “scams” going on right under our noses. We just don’t realize it because they happen all the time. Some of them are perfectly legal and consistent with free-market principles.
So if they’re legal, why do I call them “scams”?
I call them “scams” because when you — the consumer — fall for these sneaky tricks, you lose money for no apparently legitimate market-based reason.
They’re just ploys to get consumers to part with more of their money than perhaps they’d intended.
These “scams” may not be illegal. But they’re unethical and wrong from a “decency” standpoint.
In this post are 10 of the biggest money-making scams of all time. I’m going to cover both those that are illegal and those that are just a bit less-than-ethical.
Call these the greatest hits!
#1: Caribbean One-Ring Call Scam
Don’t you hate when an unfamiliar number calls your cellphone but hangs up after only one ring?
Ever been tempted to call that number back to find out why they decided to annoy you?
Scammers want you to follow that temptation and ignore your phone bill.
That strange call could have come from a Caribbean island nation such as the Dominican Republic, Jamaica, or Grenada, which use three-digit area area codes just like we do in the U.S.
Although that mysterious phone number looks like it’s from somewhere in the USA, it may actually be an international toll number (similar to those old 1-900 hotlines).
If you call the number back, you may be charged a connection fee plus $3-7 per minute for as long as you’re kept on the line. That’s on top of the fees your mobile service provider will charge you for making an international call.
If you don’t normally monitor your phone bill, those callback charges may get posted to your account, and you may pay them unwittingly.
Just doing that once can cost more than $20. Imagine just a few hundred people falling for this trick, and it’s easy to see a few thousand dollars in scammers’ pockets.
Make sure you check your bill if you do call back one of these strange numbers. If there’s a fishy charge, contest it with your cell company as quickly as possible.
Or better yet — don’t call back.
#2: Ponzi Scheme
In 1920, Charles Ponzi was caught bilking unsuspecting people out of more than $200 million in today’s dollars. The insidious scam that he used has come to be named after him.
Here’s how a Ponzi scheme works:
A scammer invites you to “invest” in his “plan.” However, instead of investing the cash as promised, the scammer uses it to pay back previous “investors” (and likely pocket some for himself).
Eventually, there are more “old” investors than there are new, so there’s no more new money flowing in. When that happens, the schemes tend to collapse.
Today, there are hundreds of Ponzi scams looking to take your hard-earned cash and even your Bitcoin.
#3: Movie Popcorn
I’m not here to disparage the classic movie snack. Who doesn’t love a tub of buttery, salty movie popcorn?
When you make popcorn at home, it’s quite cheap. You can buy a box with six microwave bags for under $2. But when you go to the movies, look out!
Movie popcorn purchased at the theater is around 1,200% more expensive than the homemade stuff.
Now you don’t feel so bad for sneaking a bag or two in with you when you go to the movies.
#4: Windows Support Scam
This scam was so prevalent and obnoxious that a few years ago the Federal Trade Commission (FTC) filed lawsuits against six companies for pulling it off on innocent Windows users.
It works like this: You receive a cold call from an unknown number, but the person on the line says they’re calling from “Windows Technical Support.”
They make claims that there are malware and virus issues on your PC, and the caller then recommends remotely “fixing” your computer for you or suggests you subscribe to a PC-protection service.
The scammer expects you to allow them access to your computer and then installs malware on your PC. Then, the caller charges you for the privilege of “fixing” your computer.
First, know that Microsoft does not call anyone about their PCs.
Second, don’t allow anyone you don’t know to access your computer system.
Third, if the call doesn’t feel right, hang up.
How is scarcity a scam?
Advertisers use this trick to get you to buy now without thinking.
They know that humans make decisions based on emotion. So they put merchandise or services on sale with a note that there are “only five left.” “When they’re gone, they’re gone.”
We get excited and nervous and have to act, lest we miss out on such a great deal.
But it might not really even be a deal at all.
Or we might not even need it. A few hours later, the thinking side of our brains catches up and we have buyers remorse. But by then, it’s too late.
#6: Fat Fingers Phone Scam
You have to admit, this one is pretty clever.
Have you ever dialed a number only to be told you won something or that if you take part in a short survey you can be entered for an island getaway vacation for two?
I became aware of this scam a few weeks ago when I called the electric company to report a power outage.
Instead of getting a representative, I got an automated message telling me about a survey and a chance for a vacation.
I thought it was odd for the electric company to do this, so I hung up and tried again.
But the same thing happened again. I hung up and checked the number. I’d been off by one digit.
It turns out this scam became popular when American Idol was on the air
As you probably remember, the show asked viewers to dial a 1-900 toll phone number and vote for a contestant. There was one unique number for each contestant.
Scammers would buy a boatload of 1-900 phone numbers, all just one or two digits off from the actual voting numbers.
But instead of offering you a beach vacation, there would be an automated message thanking the caller for “voting.”
Dialing that wrong number cost the caller about $1 in tolls.
Today, the “fat fingers” numbers often instruct you to dial another number (this one with a toll) for more vital information.
The takeaway? Don’t dial too quickly or you might get scammed!
#7: Craigslist Scams
A number of scams have stemmed from Craigslist, but we’re going to cover a couple of particularly egregious ones.
One such scam is the escrow service scam.
This involves a seller on Craigslist requesting that you use an escrow service to pay for the item they’re selling.
Unless the service suggested is escrow.com or something similar, chances are the service is run by the seller, which means once your money goes in, it’s gone.
The second one is a cellphone scam.
This one has a prospective buyer calling you about your item and saying he can’t come to you right now but wants to put your number in a service that stores your number for later.
This actually signs you up for a $10-per-month membership, and it’s next to impossible to get out of it.
If this happens to you, get a new credit or debit card and don’t bother getting a refund.
#8: Brand Names
It does pay — literally — to be a nationwide or worldwide brand.
Comparison-shop painkillers, clothing, food items, and even smartphones. When you compare them evenly, you’ll always find the brand-name item costs more.
Simple: You’re paying for the brand.
Does the Ralph Lauren golf shirt feel that much better than the Sears brand shirt? Maybe, but is it twice-the-price better?
The same holds true for food. The brand-name frozen vegetables are more expensive but taste exactly the same as the generic versions.
Don’t pay more for a name. Be smarter with your money.
Men and women should be treated equally in society. But sometimes retailers disagree.
Companies will charge higher prices for the female version of a product than the male version, despite being nearly identical.
Razors are a perfect example of this.
The male version of the razor may be 25% less expensive than the female version. Other than the color of the razor housing, there’s no difference.
Don’t believe me? Next time you are out shopping, see for yourself.
But men fall victim to this scam as well.
Just look at ladies nights at the bar. Females get in without paying a cover charge and can get discounted drinks, while males pay the cover charge and full price for drinks. Why?
First, bars know that if they attract a lot of women, men will flock to them. More men equals more money in cover charges.
Second, bars know men will want to buy women drinks. So by having men pay full price, the bars win.
#10: The Money Order
Desperation has crept in. You’re finally ready to sell that item that you just can’t give away to the neighbors.
You post the item to eBay or Craigslist and you get a nibble, if not a bite. A potential buyer offers you more money for the item than what you’re selling it for, and he says he’ll send it as a money order or cashier’s check.
All he asks is that you wire the difference back to him.
The problem is that the original money order or check is a fake, but it takes several days for the bank to realize this after it’s deposited.
By then you have wired the difference and sent your item, but you get no money from the check. Your item and the cash you sent are gone.
Yeah, ouch. But hey, at least you finally got rid of the item, right?
At the end of the day, we might differ when defining some of these as scams or just smart ways of doing business.
You might see some of these “scams” as just people or businesses looking for ways to pad their bottom line.
But if you’re looking to make more money, try a more ethical approach.
There are a lot of opportunities for making a quick buck out there, but if you go the legitimate route, you’ll enjoy the journey and the income a lot more.
Plus, there’s a greater chance that you’ll earn money over the long term, which means a lot more money in total.
Jon Dulin has over 15 years experience in the financial services industry. He shares the knowledge and lessons learned on his personal finance website, MoneySmartGuides.com, where he helps people overcome debt and start building their wealth. His work has been featured in many top-tier publications, including The Wall Street Journal, MarketWatch, BBC, Reader’s Digest, Business Insider, and more.