Top financial scams to watch out for

Whether you feel well-informed about financial scams or are just starting your research, ongoing education is one of the best ways to keep yourself safe. Times change, technology evolves, and bad actors learn new techniques for deceiving people.

A financial scam occurs when a fraudster tricks you into sharing your personal or financial information or providing direct access to your money. And those who perpetrate them often use sly tactics, including urgency, pressure, or threats—though the range can be much wider. Here are eight financial scams examples to watch for:

1. Investor imposter scams

Many scams perpetrated today involve an imposter—someone pretending to be someone or something they’re not. Christine Kieffer, Senior Director, Investor Education at the Financial Industry Regulatory Authority (FINRA), explains that imposter scams often rely on “source credibility by exploiting familiarity or claims of expertise to build trust.” An example of this is investor imposters.

In this scenario, scammers will use the names of real registered investment professionals or investment firms to seem credible and trustworthy. They’ll create a fake website, share invitations on social media to join their “stock investment groups,” or leave social media comments about how much money they’ve supposedly made with their investment strategy. The bad actors will link to a fraudulent website or an encrypted group chat to steal your information or lureyou into making deposits into fake investment accounts.

Kieffer advises being alert for signs of fraud, such as guarantees, unregistered products, overly consistent returns, secrecy, or pushy salespeople. Also, look for typos, misspellings, and unusual phrasing in the supposed investor’s communications and website.

Tip: Website URLs or email addresses might initially seem legitimate, but inspect them closely. Scammers frequently use substituted characters, such as the number “1” instead of the letter “l.”

Additionally, don’t trust what someone says at face value. “Use FINRA BrokerCheck to verify the person who has contacted you is licensed to sell investments or provide investment advice and to check for any disciplinary or complaint history,” Kieffer says. You might also want to call your bank, broker, or investment advisor for another opinion. Be sure to use a number you know is legitimate—for example, one from a bank statement.

2. Relationship investment fraud

Other fraudsters forge a personal connection to win over potential so-called investors. According to Kieffer, FINRA has seen an unprecedented increase in relationship investment scams. “These are among the leading scams reported to the FBI and are likely underreported,” she says.

The fraudster often starts by messaging you via text, email, or other messaging app and claiming to have dialed a wrong number. They’ll then strike up a conversation and might direct you to an encrypted messaging service or app to keep talking. Over time, they’ll strive to gain your trust. “This is a long con,” Kieffer says. “Over the course of days, weeks, or months, they’ll work to develop a friendship or romantic relationship.”

Eventually, they’ll bring up investment-related topics. Conversations will become more and more specific as the scammer pitches an enticing (and fraudulent) “investment opportunity” and tells you where and how to deposit your money.

“Initially, the investment will appear to increase significantly,” Kieffer explains. “Scammers might cite fake numbers or share a falsified dashboard showing impressive growth. The goal is to boost your confidence and encourage larger and larger investments.”

If you try to withdraw your funds after making an “investment,” you’ll hit a wall. The scammer might say you need to pay fees or taxes to do so. Either way, your money will remain inaccessible, and eventually, your “friend” will stop responding and disappear with your assets.

Tip: To protect yourself from relationship investment scams, don’t answer unsolicited messages from people you don’t know, regardless of how they contact you, Kieffer says. “Do not respond in any way. Don’t worry about seeming rude—prioritize protecting yourself.”

As with many scams, the key to avoiding these fraudsters is slowing down and considering their motives. Don’t make immediate decisions or take hasty actions. Use someone you know (in person) and trust as a sounding board. “They may be familiar with the situation and recognize it as a scam, or you might notice red flags as you talk through the pitch,” Kieffer says. “Take time to verify anything and everything you can before you act.”

3. Romance scams

They say love hurts, but it can be twice as painful when financial fraud is involved. Millions of people use digital methods like dating apps and websites to find romance. Although many people using these services are legitimate, scammers also take advantage of these channels. It’s important to be vigilant and keep your eyes open to questionable behavior.

Similar to the relationship scam—but typically without the “investment opportunity” angle—a romance scam often begins with a fake profile. Unexpected private messages on social media typically follow, the Federal Trade Commission (FTC) says. This is another long con that begins with bad actors striking up a relationship to build trust before eventually finding ways to defraud you of your money.

One of the first warning signs is their inability to meet in person. According to the FTC, being on a faraway military base is the most popular excuse, but fraudsters also commonly claim to be offshore oil rig workers. In those cases, stay alert for other red flags.

Romance scammers’ favorite lie, per the FTC, is that they need your monetary assistance to help someone close to them who is sick, hurt, or in jail. Alternatively, they might request money to visit you or pay for a visa. Be extremely wary if they ask for money.

Tip: There are plenty of steps to take if you’re the least bit suspicious. For instance, you can try a reverse image search of your love connection’s supposed photos. If the image results are associated with details or names that don’t make sense, it’s likely a scam.

Once you suspect a romance scam, immediately stop all communication with the person.

4. Gift card scams

These don’t just pick up during the holidays; gift card scams are dangerous year-round. To convince you to buy the cards, fraudsters might pretend they’re from the government and say you owe taxes or fines that must be paid immediately via this “convenient” method. Scammers might claim they’re tech support at a company you patronize who can fix a supposed problem with your computer—if you pay them first. They might even say you’ve won a prize—but you must pay shipping fees with a gift card to collect it.

Whatever the ruse, the truth is that no legitimate organization, governmental or otherwise, will ask you to buy a gift card. According to the FTC, bad actors will tell you specifically which cards to buy and from where. That’s a red flag. Then, they’ll ask for the card numbers and corresponding PINs so they can access the funds you loaded onto them.

Tip: Be vigilant about these warning signs, including the sense of urgency and any requests for gift cards as payment. As a general rule, never pay for services or fees with a gift card. “Don’t believe anyone who says you need to buy gift cards to fix a problem,” Kieffer says. “Real businesses and government agencies will never do that.”

5. Bank account fraud

Bank account fraud can happen in various ways, including ATM skimming and phishing (a type of imposter fraud). Thieves committing ATM skimming install hidden recording devices on the machines, allowing them to capture your card PIN and/or the data on the card’s magnetic stripe. Phishing is a fraudulent contact posing as someone you trust, like your bank or an online retailer, to obtain your financial information.

The result is that your bank account is compromised. It’s a scary prospect: Fraudsters can take over your bank account, which means they can impersonate you via phone or your digital account profile. They can drain money from your accounts and open new accounts in your name—it’s ultimately a form of identity theft. Fortunately, there are ways to protect yourself.

“If you receive a text or email claiming to be from a familiar brand, check to see if the number or the email address is truly associated with the company before you engage. Look for misspellings of names or inappropriate addresses,” Kieffer says.

Tip: If you’re an account holder with the company, there’s an easy solution. Kieffer suggests initiating communication in a channel you regularly use—like the app on your phone or the phone number from the brand’s website—instead of trusting whatever method the potential bad actor used to initially contact you.

It’s also important to keep a close eye on your accounts. By monitoring them regularly, you’re more likely to notice when something doesn’t look right and be able to take immediate steps to address it. The sooner you catch any abnormalities (such as an unexpected drop in your account balance), the safer your accounts will be.

Additionally, there are habits you can adopt to help ensure your bank accounts stay secure. These include frequently changing your password, changing your login requirements to support Touch or Face ID, and opting for paperless statements to keep sensitive information in digital form. Discover® offers a suite of account alerts and other security measures to help you safeguard your account and monitor all activity.     

6. Credit card fraud

Unfortunately, your physical card doesn’t need to be lost or stolen for you to be a victim of credit card fraud, which is the unauthorized use of your credit card information to make purchases or withdrawals. There’s no way to be completely immune to this fraud, as criminals might clone your card or hack your computer to access your information. But there are preventative actions you can take.

Tip: Your bank can be your partner in monitoring your account for fraud. Sign up for fraud alerts so you’re notified quickly of any unusual activity on your credit card. Unusual activity that could trigger an alert includes out-of-the-ordinary spending, a large purchase, or international purchases. Sometimes, you’ll make these transactions yourself and can verify you did so when prompted, but it’s helpful to know your bank is watching your back.

Also, keep your physical cards in a safe and secure place—no purses on the backs of restaurant chairs—and immediately report any lost or stolen cards to your credit card issuer. Additionally, don’t share your credit card number or other sensitive information over email or instant messaging, and avoid falling for phishing traps.

7. Family emergency scams

Your phone rings. Maybe it’s the middle of the night or early in the morning when you’re more likely to be disoriented. The voice on the other end sounds like your granddaughter, who says she’s in legal trouble. She says she’s embarrassed, begs you to keep the emergency a secret, and asks you to immediately send funds.

Kieffer explains that this is how family emergency scams play out. The call could sound like any family member. As artificial intelligence becomes more mainstream, voice mimicry “can be alarmingly accurate,” she says. The bad actors might ask you to deposit funds in a cryptocurrency ATM. However, she says authorities are increasingly seeing instances where victims are told to put large amounts of cash in a shoebox to be picked up by a courier. Sometimes, even the courier might not know they are working with scammers.

How can you protect yourself? Many scams prey on our impulses, Kieffer says, and family emergency scams are a perfect example. “​​When our emotions are heightened, we tend to bypass the rational side and become more likely to act on impulse.”

Tip: As hard as it might sound during a perceived emergency, it’s important to slow your decision making before taking any actions with financial repercussions, Kieffer says. The FTC recommends hanging up or telling the person you’ll call them right back. If you aren’t comfortable hanging up, ask a question only the real person would know, like “Where did we last spend time together?”

Once you’ve ended the call, phone or text the family member back using a number you know is correct and ask if they’re really in trouble. It’s a good idea to also call another trusted family member or friend who can help you figure out whether the story is true.

8. Sweepstakes scams

You’re the lucky winner! Or are you? You’ve received a call, message, or email congratulating you on a sweepstakes win. Although there are legitimate sweepstakes, prizes, and lotteries, there are also fake ones designed to dupe you. According to the FTC, people reported losing $301 million to this type of financial fraud in 2023.

So don’t let the excitement of “winning” carry you away. The first thing to do is ask yourself whether you actually entered any contests. If not, this is most definitely a financial scam.

But maybe you’ve played the lottery recently, so it’s not as immediately obvious. A red flag to look out for is if you’re asked to pay something significant in advance to get the prize. Whether they claim it’s a fee for taxes, shipping, or processing, don’t believe it.

The same goes for if they claim to need your bank account number or credit card number before you can collect your winnings. Stop and ask yourself why that would be the case. Again, slowing down is the name of the game.

Tip: Never click on any links provided in the message, Kieffer emphasizes. If it’s a scam, those links might be designed to steal your information or download malware. Delete the message and flag it as spam without clicking on links or responding at all.

Unfortunately, fraudsters are increasingly creative, and this list is not exhaustive of all scams. You should also be mindful of employment scams (typically starting with offers that come from outside a reliable network), out-of-the-blue “debt collector” requests, or unrecognized contacts soliciting charitable donations. Whenever money or personal details are involved, it’s always best to do your research. 

Hopefully, with diligence and the right preventative measures, you’ll never become a victim of a financial scam. But if you do, it’s important to report it to the relevant authorities. If you’ve been a victim of fraud, Kieffer recommends filing a complaint with the FBI Internet Crime Complaint Center and/or the FTC. They can work to find and prosecute the offenders and, ideally, keep others from falling victim to the same fraud.

Read tips on recovering from a scam and learn how Discover can help protect you.

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The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover Bank or its affiliates.