6 Major Red Flags to Spot and Avoid Financial Scams in the Digital Age

In the digital age, financial frauds have significantly multiplied, exploiting the internet, social media, artificial intelligence, and cryptocurrency to steal vast sums of money. Last year, financial losses due to cybercrime surged by 33% according to the FBI’s Internet Crime Complaint Center, reaching an alarming $16.6 billion. The majority of these losses were attributed to fraud, with the average reported loss amounting to $19,372.

The Consumer Federation of America ranked financial scams as the sixth most common consumer complaint in 2024. Senior citizens aged 60 and above are particularly vulnerable, with a more-than-four-fold increase in reports of losses exceeding $10,000 between 2020 and 2024. Some victims reported draining their bank accounts and even emptying their retirement savings.

Imposter scams, where criminals masquerade as trusted government agencies or businesses, are among the most prevalent types of frauds. Instead of attempting to steal financial account numbers, many scams now focus on persuading victims to transfer funds from one account to another under the scammers’ control.

Scammers may contact you pretending to be from a reputable organization and create an urgent problem to trick you into transferring money for “safekeeping” or other false reasons. They might claim that your Social Security number is linked to serious crimes, warn about suspicious account activity, or threaten legal trouble requiring a bond payment.

Some scammers may offer attractive opportunities, such as easy money in exchange for simple tasks, only to ask for an upfront payment. Tech support scams are also common, taking the form of pop-up security alerts or audible alarms on your computer that claim to be from Microsoft or Apple. These messages often suggest that your computer has been hacked and provide a number to call for assistance.

Sometimes the criminals will claim they need remote access to your computer to fix something. Prize and sweepstakes scams are another form of imposter fraud, where scammers pose as representatives of a sweepstakes or lottery entity and demand money to release promised winnings.

To avoid falling victim to financial scams, it’s essential to be vigilant. Don’t engage with unsolicited calls, texts, emails, or messages from unknown numbers or suspicious sources. Instead, if you suspect a call might be legitimate, contact the entity directly using their official contact information obtained independently.

Never transfer money on demand and be wary of offers that seem too good to be true, especially if they require an upfront payment for a reward (e.g., commission, job, prize winnings). Remember that legitimate businesses, government agencies, or law enforcement entities will never demand money, make threats, or request transfers of funds.

Be aware that scammers can exploit vulnerable moments, so don’t assume you’re immune to being deceived. If you suspect you’ve been scammed, take immediate action to minimize losses by informing your bank and relevant entities such as credit bureaus or gift card issuers. Consult a consumer law attorney specialized in consumer rights and fraud to discuss your options.

Lastly, report the scam to the Federal Trade Commission at ReportFraud.ftc.gov. Sharing your experience with others can help prevent them from falling prey to similar scams. Research suggests that word-of-mouth is the primary means by which people learn about scams.