8 most-common scams: How to spot them and stop them
Friday December 10, 6:00 am ET
Amy Fleitas

There are no new scams -- just new suckers. Scam artists add new spins to age-old scams and go in search of victims. Yesterday's snake-oil salesmen are today's e-mail hucksters for nutritional supplements. Only today, these shysters don't personally swoop down on small towns with loud, rapid-fire, slick pitches. They slither through dial-up and cable connections and crouch in your e-mail inbox, on Web sites, or attack by telephone, disguising their identities behind nameless, faceless modern technology.

Don't get sucked in. By learning the eight basic scam types, you will be able to spot any scam -- no matter what new spin it's given by clever con artists.

Advance fee scams
Advance fee scams are easy to spot: You pay a fee in advance for receiving a credit card, loan or scholarship. In return, you get nothing valuable -- either the scammer disappears or you get a bunch of worthless junk. For example, one reader called to tell us about an advance-fee credit card scam that had tricked her. She paid a fee in advance to receive a new credit card. What she got was a list of banks that have credit cards -- all for the hefty price of $198. You should never pay in advance for a credit card. Even credit cards that have a fee will include the fee in your first billing cycle -- after you have received the card. And, by the way, you can search Bankrate for lists of fee and no-fee credit cards -- for free.

Searching for a loan may lead you down a similar path. Recently, the Federal Trade Commission spotted several fake loan ads. The ads look real and even use the logos of real banks and credit unions. But the phone number in the ad will lead you to an imposter on a cell phone who asks for your personal information, tells you where to wire money for a fee, then disappears -- stealing your cash and identity.

You should also be wary of offers for scholarship searches that require paying an upfront fee. You can find most of this information yourself -- also for free. Ask your local librarian or school counselor for help in researching scholarships.

The prize that will cost you
It should go without saying that if you get an e-mail saying you won something -- and you didn't enter -- you should just delete it. This is a common scam.

Here's how it works: The e-mail says you've won, but to receive your lottery winnings or whatever the prize is, first you must pay the taxes or a handling fee. You hand over your cash and you never hear from this person again. Or, you are told you won a hotel or resort stay, but in order to use your prize, you have to pay for your own airline ticket -- booked through the agency that is awarding you the "prize." The ticket price will be inflated to cover the cost of the hotel.

If you didn't enter anything, you didn't win anything. And even if you did enter, taxes go to the government, not to the organization running the contest.

Also, do not give out personal information such as your Social Security number or bank account number to anyone to claim a prize. They're just trying to steal your identity.

Online auctions
There are several things to be careful of when bargain-shopping online. Even a noodle-brain can research an item quickly and discover its worth online. If you find an item priced far too low, it may be a scam -- a fake item, a stolen item, an item in really bad condition or something you will pay for and never receive. This is especially important in online auctions, where the pressure may be high as the bidding reaches the closing time.

Looking for a better bank? Check for the best deal in your area.

Never agree to pay by cash or money order -- these methods of payment are untraceable and offer you no protection. You may also want to be wary of escrow companies because they are easily faked. In the best scenario, an escrow company takes your payment and holds it until the seller sends you the item. However, auction scammers have set up Web sites for fake escrow companies. This means you send the escrow company the money and you never get anything in return.

When paying for an item in an online auction, you should pay with a credit card if possible.

And no matter how great a bargain it may seem to be, never buy anything online from someone who approaches you through instant messaging or e-mail. Often, what happens is the contact person will tell you they have the item you are bidding on and will sell it to you for less. They may even lead you to fake Web sites they set up. By registering on the site, you provide them with all the information they need to steal your identity -- and of course, you never receive the items you paid for at their site.

To stay safe, only shop sites you know and trust.

Fraud jobs
There are several types of employment scams. The most notorious tricks include being recruited for an illegal job; identity theft through job applications, and bogus employment fees.

Fraudulent job opportunities often involve work-at-home offers. One of the newest appearing on job boards is the "reshipper." You are offered a good salary for receiving packages at your house and reshipping them overseas. The scam has several complicated layers, but basically, you pay out-of-pocket to ship the packages overseas, you get paid with a fake check, and the packages were paid for with stolen and fake credit cards.

An added hit to this scam: The information you provided in your job application made you a victim of identity theft. The scammers then use your information to apply for credit cards to buy more merchandise.

Other scammers don't bother to create the elaborate reshipping scheme -- they just tell you that you got whatever fake job they posted, then request your personal information "for the human resources department" and use it to steal your identity.

While hunting for a job, you may encounter someone who promises you a job, but only if you will pay a fee for processing, administration or uniforms. Steer clear of these people even if they promise you a money-back guarantee. Use employment services that charge the employer -- not the potential employee. Don't pay fees for uniforms. If you must pay for a uniform, ask that it be taken out of your first paycheck.

If you do decide to pay a company to help you find a job, ask for all details of its services in writing before you agree to anything. Some companies may promise jobs, but just deliver a stale list of job openings they found in newspapers or online.

Ignore offers that promise insider information for federal government jobs. All federal government jobs are announced to the public.

Money-making schemes
When people are down on their luck, they may turn to get-rich-quick or money-making schemes. Somehow the scammers make old scams, such as the Nigerian scam and pyramid schemes, seem like plausible ways for you to make a lot of cash in a hurry.

You've probably been courted by the Nigerian scam, also known as the 419 scam (named after the section of the law pertaining to it). It comes in e-mail or letter form and may start, "Dear Sir, I got your information from a confidential source.... " The letter then goes on to tell you a story of a huge amount of money hidden overseas that the writer of the letter wants to put in your bank account. In return, he promises you a big cut of the cash.

Long story short: Any checks you receive from this person will be fake. The con will ask you to keep part of the money and send him the difference. Shortly after you send him the difference by mail or wire, his check bounces, and you owe the total amount to your bank. Warning: Sometimes, people are told by their banks that the check has cleared, so they wire the difference to the Nigerian scammer. But don't be too sure: The scammers sometimes forge a cashier's check, which fools the bank into prematurely reporting the check as "cleared." Once the forgery is discovered, the bank will try to hold you liable.

Never agree to accepting a check for more than the amount of the sale and then sending the difference to the buyer or anyone else.

Like the Nigerian scam, pyramid schemes seem like a fast way to make a lot of money.

If you've never heard of pyramid schemes, here's how they work: One person convinces several people to join a club or business. The only way to make money is to get more people to sign up, too.

For example, certain groups that call themselves "gift parties" require that everyone who joins donate $4,000. All the cash goes to the person who is at the "top." You are told that as soon she has received a certain amount of money, she will step down and nominate the next person to be on top.

While these schemes seem like an easy way to make cash, inevitably, the only person to make money is the one at the top -- who usually gets busted or blows town before the group figures out that the math doesn't work.

The old axiom is true. If it's an easy way to make money, it's probably illegal, a scam or just a really bad idea.

Bogus charity
No one wants to be the bad guy -- the selfish lout who can't spare a little change for the orphans of September 11 or children who are cancer patients. But that doesn't mean you have to be a sucker. If you want to give to charity, by all means, give away -- but check out the charity first.

Never give payment information to anyone calling or e-mailing you, claiming to be with a charity. Ask them to send you paperwork on their organization. Then research the organization online and with the Better Business Bureau to make sure it's legitimate -- and that you've got the right contact information. For example, an e-mail circulated in 2001 claimed to be from the Red Cross. It said it was raising money for victims of Sept. 11. While the Red Cross is a legitimate charity, the e-mail led people to a Web site set up by con artists.

If the charity representative pressures you to give immediately, get even more suspicious. Legitimate charities withstand scrutiny, and never hesitate to prove they are who they say they are.

Identity theft
Identity theft is not new, but it is on the rise, running rampant over the Web at breakneck speed. The thieves need only a few elements to victimize you -- usually, your name and Social Security number will do. Obtaining this information is often intertwined with other crimes -- advance fee scams and bogus job offers among them.

The name for this scam is "phishing" -- as in fishing for your information but with a "ph" as in "phony."

Almost any scam can be sprinkled with a smattering of identity theft -- advance fee scams, fraud jobs and online auctions included. All it takes to become a victim of identity theft is a leak of your personal information. Your garbage may be targeted. (That's why you should shred anything that has your account numbers, Social Security number or that says you are "pre-approved" for credit -- before you throw it away.)

Telemarketers and e-mail spammers may attack you under the guise of protecting your accounts, auction transactions and credit cards. Some even pretend to be law enforcement or government agents.

If anyone from any company you do business with or that claims to be a representative of a government agency (like the police or FDIC) demands your personal information or an immediate payment for any reason, ask for a number and tell them you will call them back. Then get the number from a different source (bank statements, credit card statements or the phone book) and ask if the call was for real. Four bazillion dollars says it wasn't.

If this bet is wrong and there is some particularly friendly company making these sorts of calls, it won't mind if you say you need to call back.

Remember that clever phishing con artists are always looking for a new angle -- they may say they are from various different companies or agencies. Don't get caught off guard.

Products that are too good to be true
If it seems too good to be true, it probably is. Remember that a con artist makes a career of using excuses and explanations to lead you away from your common sense. When dealing with your money and personal information, never allow yourself to be rushed, threatened or persuaded against your judgment.

Don't believe offers that claim to have found a way around the law -- like reasons you don't have to pay your bills or taxes, promises to clean up your credit history or claims that you can get a new Social Security number or a new driver's license if yours was revoked. And claims of "miracle diets or pills" that can enhance your features or help you lose weight should be regarded with skepticism at best.

Keep in mind that offers that are too good to be true aren't confined to the Internet or telemarketers. They can also be found in mail offers, the ads in the back of magazines and in brick-and-mortar stores. Stay vigilant and trust your gut.