The Top 7 Worst Online Scams This Year And How To Avoid Them!
Scams: the Internet allows individuals or companies to communicate with a large audience without spending a lot of time, effort, or money. Anyone can reach tens of thousands of people by building an Internet web site, posting a message on an online bulletin board, entering a discussion in a live chat room, or sending mass e-mails. It's easy for scam artist to make their messages look real and credible.
People who are most anxious for credit are those most vulnerable. Others stack the deck so heavily against the borrower that while legal, they are simply unconscionable. Most prey upon your ignorance and desperation.
Some of the largest corporations in America are nothing more than sophisticated pool hall loan sharks who routinely fleece their clients.
Because credit is big business, all the pressure that Madison Avenue and modern technology can bring to bear is used to convince you to sign on the dotted line and enter into a credit deal scam that is rarely in your best interests.
1) Catalog credit card scams
Issued by mail order catalog companies, these cards allow to purchase from their company’s catalog. Often called gold or you platinum cards, they sound like bank credit cards, but are not. You will be offered a high credit line without any credit check. And if this offer sounds too good to be true, it is. Why?
The merchandise in their fancy catalog's is overpriced by 50 percent or more, so you vastly overpay for the credit. You must make a large down payment (between 40-85 percent of the price) to cover the seller’s product cost. The company thus loses nothing by offering extensive credit even with no credit checks because later payments become pure profit to the seller.
Other tricks inevitably accompany the cards: expensive application, memberships, or order processing fees. And while these companies claim there are no interest charges, the interest is hidden within the inflated price. These catalog companies seldom report to credit bureaus, so despite their claims, you cannot rebuild credit by dealing with them. They are simply a very easy way to obtain expensive products with very expensive credit!
2) Advance-fee loan scams
While illegal in many states, hundreds of thousands of people are still victimized by these scams each year. In its simplest form, someone promises to find you a loan in exchange for an advance fee. This person may call himself a loan broker, however, after you pay this advance fee, the broker disappears with your money. Legitimate loan brokers usually collect their fee after they obtain your loan, with their fee paid from the loan. An advance-fee loan broker, in contrast, collects before the loan is found.
There are many sophisticated techniques used to get you sucked into these scams. You might answer an ad from a professional sounding firm urging you to call a 976 number for more information, or to receive an application. The price of the call could be the fee or you may be asked to pay the fee by credit card, check or money order. These advance-brokers frequently advertise via cable television, radio, newspaper, fliers and handouts.
It is virtually impossible to recover your money if the broker fails to deliver. Be suspicious of anyone who asks you to pay for services before delivery.
Before you hand your money over to such a broker, contact the Better Business Bureau, your state Consumer Protection Agency and the Federal Trade Commission.
3) Bogus credit repair company scams
They may claim the company is affiliated with the federal government. In truth, beyond passing laws to protect consumers from unfair credit practices, the federal government is in no way connected with any aspect of credit repair scams.
Credit repair companies use many techniques to draw clients: from court reported bankruptcies and telemarketing to direct mail advertising. Once they contact you, they often prey upon your fears with these lies and deceptions:
They may tell you that file segregation is a legal credit repair technique. But file segregation is an illegal technique used by some companies to create a separate identity for a client. This is a federal crime that may also involve mail or wire fraud. You may also be sued for civil fraud.
The mis-representations by credit repair companies are designed to panic you into seeking their help. The more desperate you view your situation, the more you will believe their extravagant claims.
They may also trade on your fear that bankruptcy destroys your ability to obtain credit for ten years. This also is not true. Most creditors consider bankruptcy case by case, and take into account the reason for the bankruptcy, and whether it was due to circumstances beyond your control, such as illness or job loss.
Some states have laws that regulate credit repair companies.
These states usually require credit repair companies to be bonded (or have insurance to cover up-front deposits in case they are sued by clients), abide by the FCRA, inform clients of their legal rights, provide clients with a written contract and allow clients 3 to 5 days to change their mind after they sign a contract.
Also disguised as a debt counseling service may be a bankruptcy attorney using the service as a front to attract clients. Another firm may offer you a national bank card which is only a secured bank card easily obtained yourself without having to pay an additional fee to the credit repair firm.
Credit repair companies often disguise themselves as a legitimate financial-aid company, debt counseling service, loan consolidation company, or credit-fix-it company.
Look for certain warning signs when you investigate one of these companies. These scams include such impossible claims and false promises in the company’s advertising, as No credit beyond repair, Eliminate all negative reporting including bankruptcies, or We can get you unlimited credit now, no matter how poor your credit history.
These companies promise to fix your credit often for an exorbitant fee that can run into thousands of dollars. Remember, a credit repair company cannot do anything more than you can do yourself through patience, persistence and knowledge. And you can do it for far less than it will cost with a credit repair company.
Also be wary if the company claims it can get you a major bank card even if you have poor or no credit.
Fifteen states that regulate credit repair companies are: Arkansas Louisiana Oklahoma California Maryland Texas Connecticut Massachusetts Utah Florida Nevada Virginia Georgia New York Washington Disguised as a debt consolidation company, the credit repair company also may offer you a very high interest loan with large up-front fees, possibly secured with your home as collateral.
4) Credit card cash advances and cash advance check scams
These scams are used by some banks to force you into a high interest loan.
Here’s how it works:
You try to cash a check at a branch of the bank where you have your account. The teller refuses because it is against bank policy to cash checks from its other branches, so he suggests that the bank instead give you a cash advance on your bank card. But of course, you may pay a huge advance fee to the bank for issuing the card, and also pay high interest from the minute you receive the money because banks often eliminate the interest-free period with cash advances.
If the bank eliminates the interest free period because of the cash advance, it can do so for the entire balance of your bill. You could therefore pay as much as 285 percent interest, even though you fully paid the entire cash advance within 30 days. Some banks will charge you additional interest on any unpaid balance in your credit card account.
This ploy is known as pyramiding.
Cash advance checks work exactly the same as credit card advances. The charges still appear on your monthly credit card bills and are subject to the same unconscionable interest rates.
5) Overdraft protection scams
This so-called protection can easily destroy you financially and is a variation of cash advance scams. Here’s how it works: If you write a check that exceeds your account balance, the bank honors the check and charges the difference to your credit card account. The bank will point out that since you avoided bouncing a check you avoided a bounced check fee.
But here’s what you will pay: Because protection is usually rounded to the nearest 100 dollars, if you exceed the balance in your checking account by even 5 cents, the bank advances you the full 100 dollars. You are now also liable for all the other costs associated with credit card cash advances. The bank will apply the extra $99.95 it forced you to borrow and reduce your credit card account, while the bank collects interest on your loan.
Madison Avenue has given cash advance checks fancy names, but they are still only another way of using your credit card.
6) Insurance from your credit card issuer scams
Insurance offered by a credit card issuer is usually unnecessary and always overpriced! The terms are the worst to be found anywhere, whether it be life insurance, disability, unemployment, hospital insurance or any other type of coverage.
Taking advantage of a company’s offer to waive a monthly payment may free you from that month’s payment, but you don't save money you simply increase your debt.
Be particularly skeptical about credit insurance scams. Banks love to sell this overpriced insurance because the banks are the beneficiaries as the payment is used to pay your outstanding balance if you die, while they collect hefty premiums in the interim.
7) Credit card registration service scams
These companies offer you protection from loss of your credit cards with just one phone call. If you pay 15 dollars a year for this protection, it will ultimately cost you hundreds of dollars to have avoided a few toll-free phone calls. And each time you add or subtract a credit card from your list you must still notify the registration service by mail and store that correspondence. It is far easier and cheaper to keep your own records and notify the credit card companies yourself.
Scams Six Facts To Keep In Mind:
There are, of course, many other credit scams. And new ones are conceived daily. But how do you avoid them?
- be patient
- be suspicious
- read the fine print
- do not sign anything that you do not understand
- check references
- practice good credit management
Avoid quick-fix solutions. If it sounds too good to be true, it probably is.
What should you do if you are scammed?
First, contact the Federal Trade Commission, Better Business Bureau, state’s attorney general or the Department of Consumer Affairs to see if complaints have been filed, or legal action taken against the company. Second, meet personally with a representative of the company. Have the company tell you what it can and cannot do for you and get it in writing. Finally, do not under any circumstances give the company money in advance.
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