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How to Avoid Online Scams

Though Nigerian email scams may be the butt of late-night comedian jokes, online fraud is still alive and well.

Scams involving individuals, such as identity theft and financial scams, cost their victims nearly 240 million in 2007 over four times as much as they did in 2004. Sadly, the numbers seem to only be going up farther and faster.

So how do you keep yourself safe when looking for work or even simply using the Web? Considering the rapid rise in online scams, it is getting harder and harder to avoid them and nearly everyone has at least seen the emails or sites. Fortunately, with a few simple precautions, you can avoid getting taken in by the Web's con artists and keep yourself safe as you shop and work online.

Why People Scam

The most important thing to understand when avoiding scams is learning how to understand the motivations of a scammer and why they lie and deceive.

Simply put, there is nothing new about online scams. Most of the scams we're familiar with today are actually modern version of old scams.

For example, the much-laughed-at Nigerian 419 scam is actually a variation of the Spanish Prisoner Scam, which dates back to the 1900s. Likewise, many of the classic junk mail scams from the mid to late 1900s have made their way online, including "Work at Home", "Fake Lottery" and "Charity Fraud" scams. The only thing that has changed is that, rather than going through the time and expense to send out paper letters via postal mail, they have now set up Web sites and use email spam.

What this means is that the con artists online are no different than the con artists that existed a hundred years ago. They are running many of the same scams they were decades ago, but using the Internet as their tool as it is cheaper, faster and provides a greater sense of anonymity.

This means that, while some online scammers get into the business out of desperation, most seem to get into it is the easiest way to make a large amount of money and they simply do not care that it is both illegal and immoral to do it by tricking others. Most scammers are professionals at it, they have done it for years and are experts at their craft.

As such, it is important that users be at least knowledgeable of the tactics and aware of some basic rules as so not to get tricked.

Common Sense Rules

When it comes to avoiding scams on the Web, there are five basic rules to follow:

1. Be Wary of Unsolicited Offers: Legitimate offers almost never come unsolicited. If you receive emails regarding working at home but have not requested any information, notifications of lottery winnings when you haven't played the lottery involved or other such contacts that you've done nothing to request, it is probably a scam. Those who are interested in legitimately hiring an employee will advertise in traditional channels such as classified ads and online job posting and will require those interested to contact them. Though those can be scams too, at least they are many times more likely to be legitimate.

2. Protect Your Personal or Financial Information: Never give out your personal or financial information unless it is absolutely necessary. You should never give out your banking, credit card, social security or other similar information unless you have thoroughly researched the entity and know that they are trustworthy. Though some companies, such as Google with Adsense, will require SSNs for tax information or checking account information for direct deposit, these cases are extremely rare and you definitely should never give out such information either to a stranger, over an unsecured connection (including email) or to a site that you found via an email (always type the links yourself or use your bookmarks).

3. Never Wire Funds: Do not use services such as Western Union or Moneygram to send money over the Web as there are no protections for the sender. Use your credit card or PayPal account as these tools have methods to reclaim money should the transaction to awry. Once you have sent money via either a wire transfer from any wire service, the money is gone.

4. Remember Who is Paying Who: With legitimate affiliate marking, real jobs, lotteries or other honest businesses, the person doing the work or receiving the money does not pay for the right to do so. Many scams pretend to hire workers and get them to pay startup fees, supplies, etc. and then walk away with those up front fees. Any transaction that requires you to pay first is very likely a scam.

5. Research Everything: Before you send money to anyone, even it is just an online purchase, be sure to thoroughly investigate the company and/or the person. If you're on an auction site, check the person's feedback. If you're dealing with a business, do a search for their name and also look up their information with the Better Business Bureau. If it is an individual, look the name up and understand everything you can about who you are doing business with. In all cases, try to get viable, real-world contact information for them and confirm it.

6. If It Sounds Too Good to Be True, It Is: Many scams lure people into thinking that something wonderful has happened to them, causing them to lose all sense of reason. It is important to look at everything you received rationally and see if it is likely true, bearing in mind exactly how common scams are on the Web.

7. Read the Fine Print: Just as with the print world, before you agree to anything, be sure to read it carefully and thoroughly. Read the fine print and, if you need to, have an attorney look over the contract for you. Such consultations usually only cost a small amount and can help avoid much costlier mistakes down the road.

The bottom line is to take the same precautions on line that you would in the real world. People who would never believe that they won a Canadian lottery if someone on the street randomly told them so, yet so many are ready to believe it on the Web and lose money because of that. Treat all of your interactions on the Web the same as you would in the physical world and the odds of you being scammed are much less.

Type of Scams

There are at least 20 different types of major online scams taking a wide variety of approaches and angles. They range from the extremely simple, such as charity fraud, to the very complicated, such as full-blown identity theft. However, all online scams are capable of fleecing their victims of tens of thousands of dollars, making it important to be aware of how to spot and stop such scams before they start.

Here are four of the more common types of online scams and how to avoid them:

1. Advance Payment Scams: An advance payment scam is any type of scam that requires the victim to pay out an amount of money before receiving a substantially larger amount in return. Nigerian 419 scams, fake lottery frauds and some work at home scams use this method. Remember, you should never have to pay money to receive revenue and anyone who needs cash for a legitimate purpose that could generate such a large profit would have no trouble securing funding from a traditional lending institution. Never agree to send out money before receiving payment, especially via wire transfer.

2. Fake Money Order/Cashier's Check Scams: These scams involve sending the victim a fake money order or cashier's check that they deposit, assuming to be real and then send the con artist either money from the check or goods and services for it. This scam is common with fake lottery frauds, where the cashier's check is an advance that should be used to pay taxes or some other fee, as well as with auction frauds where it is sent as payment, usually with an "accidental" overage to encourage the victim to send cash for the difference in return. Never do business via these methods on the Web and, if you must, allow two weeks for the checks to clear before sending any product as banks will often take a period of time to discover the error and your account will be held responsible if there is a problem with it.

3. Phishing: Phishing is the obtaining of passwords, usually banking passwords, through trickery. This is done usually by sending out a fake email purported to be from your bank, Paypal or another financial institution with a link to a site that looks similar to the real one. However, it's actually a dummy site set up by the scammer that then captures your login information and uses it to access your money. To avoid this scam, never click on links in your email, always type in the links yourself or use your bookmarks. Also, be sure to keep your computer [previous article] free of viruses and spyware as they can often misdirect you maliciously.

4. Charity Frauds: Charity frauds are the simplest ones to execute. Information about a charity, real or imaginary, is sent out and users are directed to a payment page to donate. Charitable users donate, but the money instead goes to the con artist and not the charity. This scam is often similar to phishing as many scammers will impersonate legitimate charity sites. To avoid this scam, if you are interested in donating to a charity, go directly to their site and donate there, once again, do not click links found in an email and always research a charity completely before you give over your information.

Other Things to Watch Out For

In addition to the above outright scams, there are also several types of activities on the Web and elsewhere that are not necessarily "scams" in the strictest sense of the word, but do attempt to separate people from their money in a way that is not altogether honest. So, in addition to the scams, above, be careful of some of the other potential traps below:

1. Negative Option Billing: Negative Option Billing is a form of billing commonly associated with book clubs, music clubs, etc. It works by signing up people to receive a product regularly and then sending out the next product at regular intervals, charging the customer for every product shipped, until they specifically request to stop it. A similar version for subscription programs, such as cable TV, allows them to add features and channels at a cost unless expressly denied. Problems emerge when companies make it difficult to unsubscribe to such plans or keep billing after it has ended.

2. Invoice-Like Advertisements: Some companies, both via mail and email, will send out marketing material that looks like an invoice or a bill and encourage to pay for services or goods that were never requested. These are particularly common among domain name registrars and certain trade organizations. Never pay any invoice for a company that you do not recognize and check out suspicious ones thoroughly.

3. Bait and Switch: Some companies will routinely advertise a low-cost service or product but will constantly try to upsell customers to a more expensive one. Historically, this has been a problem at physical retailers that would quickly run out of stock on sale items but many Web companies, especially hosts, have taken to using this method by making it difficult to locate or buy the lower cost product.

All of these items are common practices to watch out for and are things that otherwise legitimate companies may do. It is important to be on guard for these tactics and avoid them whenever possible.

What to Do if You Get Scammed

Sadly, sometimes even the most attentive people fall victim to a scam. If you or someone you know has fallen victim to a scam, you should take these following steps immediately.

1. Stop Payment: If you paid with a credit card, contact your card company and dispute the charges. Be careful not to pay with a debit card as your recourse is much more limited. Also, if you paid by check and caught the scam in time, you may be able to stop payment on the check. Once again, do not pay with money transfers or money orders as they can not be stopped.

2. Contact the Authorities: Gather as much information as you can and contact your local police. Once you file a report with them, they will likely direct you to file a report with the Federal Trade Commission, the FBI and/or the United States Postal Service depending on the nature of the scam.

3. Notify the Credit Agencies: If you feel your personal information may have been made vulnerable, notify the credit agencies of the potential for identity theft and have them put your SSN on "freeze", this will require them to contact you before extending any credit.

Though being scammed is never pleasant, especially since the odds of recovering the money are slight, it is important to mitigate the damage done to you and report the incident so that it, hopefully, won't happen to anyone else.

Bottom Line

Sadly, online scams are alive and well and are very big business right now. As the economy makes a downward turn, more people are going to become victims of scams not only because there will be more con artists working, but desperate people make excellent targets for tricksters.

It is best to protect yourself and be aware of what is going on around on the Web.

Sadly, the Internet is a dangerous place. But if you know how to keep yourself save, your chances of getting burned are very slim.

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