You’ve probably heard the pitch on the radio or seen it on your favorite website. Or maybe you’ve seen it in your e-mail or on the Internet. It goes like this: You can make a lot of money, usually without leaving home. Or you can get a credit card no matter how bad your credit record. Just call this number or click this link and find out how.
Let’s say you do take the next step and try to find out if the deal’s for real. What you’re likely to find is a request for money—to get you started. It could be just a small charge, but you’re asked to pay by credit card. You might get a “free trial” of something. Or maybe you’re asked to buy a book or a CD to learn money-saving secrets.
See a pattern? This is how scams often work. First comes the offer of easy money or easy credit. Then comes the catch. For example, in an advance-fee loan scam, a scam artist posing as a legitimate lender asks you for money before you can get a new credit card. He’ll take your money and you won’t get a card. (One tip-off: He may show no interest at all in your credit history).
Easy work, big money? Bad deal
Or you might check out an offer to make thousands of dollars every month working from home. The work looks easy—like stuffing envelopes, assembling toys, surfing the Internet or processing rebates. But first you have to pay for something, like training or supplies. Or you have to pay a small fee with your credit card, thus giving the scammer your card data.
But later, when it’s time to get paid, there’s always some problem. Your assembly work is not up to par. The rebates never materialize. If you sign up for “envelope-stuffing” work, you may just get a letter telling you to get others to sign up if you want to get paid. Another term for this is a “pyramid scheme.”
The Federal Trade Commission says pitches like these demand “research and skepticism.” There are legitimate work-at-home businesses. One way to find out if you’re dealing with one is to get the terms in writing from the sponsor. The FTC at http://www.ftc.gov/bcp/edu/pubs/consumer/invest/inv14.shtm has more tips on how to do this.
Credit “repair” can do damage
“Credit repair” is not a bad thing. People need it if they are maxed-out on credit cards and can’t make the payments. It can involve several steps: making a budget, controlling your spending, working out payment plans with creditors. You can do this yourself, and there are non-profit groups that will help you get started. But you should not have to pay for this help. If you see an ad saying “only $400 for credit repair,” watch out, says Kelly Rogers of the Credit Counseling Service of Orange County in California.
Another pitch to beware of, says Rogers, comes from debt-settlement companies. These firms offer to reduce your credit balance by some large amount—in half—if you sign up with them. When you do, they tell you to stop making card payments and send them money to put in a “trust” account. This money is to be used later to pay your debts in negotiated settlements. In the meantime, says Rogers, your credit score “crashes.” You also have to put up with constant calls from creditors demanding payment.
The debt-settlement may also ask for a fee up front. This is a sign to walk away from the deal.
The Do Not Call defense
Scammers make their pitches in many different ways, from Web ads to flyers tacked on utility poles. But phone calls are still one of their favorite channels. It’s easy to see why. Other methods, like mail, give the target some time to think. You don’t have someone at the other end of the line asking for a decision right now. Phone calls also can come when people are too distracted or busy to pay close attention.
One way to cut your risk of being caught off-guard by a phone solicitation is to get on the National Do Not Call Registry. This will keep most telemarketers from calling you if you haven’t made contact with them first. For details and registration, go to www.donotcall.gov. Or call 888-382-1222, TTY: 866-290-4236 from the number you wish to register.
For information on avoiding scams, as well as other aspects of managing your money, go to the FTC’s “Money Matters” site at http://ftc.gov/bcp/edu/microsites/moneymatters/index.html. The FTC also has a site on how to do your own credit repair, http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm.
The National Foundation for Credit Counseling has a guide to the debt settlement business at http://www.nfcc.org/consumer_tools/consumertips/DebtSettlementCompanies.cfm.
For more on scams, see the Federal Reserve’s “Frauds and Scams: Protect Yourself and Your Money” at http://www.frbsf.org/publications/consumer/fraud.html.