This credit card stacking scam could land you in deep financial trouble: Internet Scambusters #995
Card stacking is what it says -- a way of raising money by taking out multiple credit cards.
It's perfectly legal (if you can get away with it) but it's also at the heart of some severe and costly scams, as we explain in this week's issue.
We'll also tell you about the biggest online security threat that's around right now -- the so-called "log4j" software bug -- and what to do about it.
Let's get started…
Why Card Stacking Loans Could Be a Costly Scam
You need money but you can't imagine where it's going to come from. So, you approach a loan company that has the answer: Take on lots of credit cards and max them out for cash or to pay debts.
That, in a nutshell, is card "stacking." It's a favorite practice of dubious loan companies, who will also charge you a hefty fee for the privilege of seeming to get you out of debt.
Now all you have to do is make the minimum payments on each card -- and watch your debt get higher and higher as the astronomical interest rates begin to bite.
As always with scammers, the people who can least afford it are hit with a financial burden that could stay with them for the rest of their lives.
And this is probably the worst time of the year for them, with spending running above anything they can truly afford. In fact, the stacking scheme will probably encourage them to spend even more money they don't have.
But they're not the only ones to suffer.
Earlier in 2021, a company used stacking as a supposed way to help clients who wanted to raise cash to launch businesses. The firm allegedly applied for the credit cards on behalf of these would-be entrepreneurs, sometimes entering untrue information, such as exaggerated income.
To make things worse, the firm supposedly charged each victim $3,000 and then used some of their credit card funds to pay for questionable training materials that was supposed to help them launch the business.
A similar approach is sometimes used in dubious loan settlement or relief programs in which so-called advisors tell people they can pay off their debts, including student loans. These scammers usually charge a sizeable fee for their "service" and, again, do no more than fill in stacked credit card applications.
Credit cards are already one of the most expensive ways of borrowing money. Even the established, reputable card companies charge an average rate of more than 16% and, with less reputable ones, the sky's the limit.
Although it's expensive, stacking is not always bad, as when someone with a temporary cashflow problem uses it to get an unsecured loan in the sure knowledge they can repay it quickly, often without interest charges.
In fact, there are several YouTube videos telling viewers how to do it. And it's perfectly legal, as long as you tell the truth on applications.
But otherwise, it could be the wrong way to go, especially if it's suggested to you as a way to pay for something the offeror is selling, notably coaching or training materials. The risks of ending up in default on your debt and maybe a bankruptcy hearing are too high.
And if you've already fallen for it or are looking for ways of cutting your credit card debt, robocall scammers will be waiting for you, offering more cards at lower interest rates. If they're robocallers -- using recorded messages -- they're almost certainly scammers.
They may claim to have special deals with the card issuers that others don't have access to. This is simply not true, and they can generally do no more than you'd do yourself.
The Best Advice
The best advice, whether you're seeking to borrow money or reduce debt, is to speak to a financial expert.
A good starting point is to speak to your present card company yourself. Or you could maybe find help from your bank.
Alternatively, you can also get free advice from several organizations that will help you steer clear of the scammers. For example, businesses can turn to the government's Small Business Administration. Individuals can seek help from agencies like the National Foundation for Credit Counseling.
Here are some other tips to follow:
- Get reliable advice from a true financial professional. Do your research on them first.
- Ignore robocalls and unsolicited calls, mailshots, and emails offering loans or debt help.
- Avoid using card stacking programs for speculative purposes, like starting a business or to pay for materials or training.
- If you must use stacking -- and we're not recommending it -- do it yourself, don't pay someone else to do it.
- Always be truthful in making any financial application.
- When you arrange any type of finance, make sure you know where the funds are coming from. Scammers have been known to make applications in victims' names without even telling them.
- Don't give personal financial information, like account numbers, to any loan-giving organization until you've fully checked them out.
Remember this: Just because card stacking is legal, doesn't make it right.
These organizations will help you put together a financial plan that should work for you, without it costing you a cent.
This Week's Scam Alerts
Log4j Threat: "Log4j" is a piece of computer code that sits on most computers and servers and for which a software glitch now threatens 13 billion devices worldwide. The bug has already enabled hackers to infiltrate devices and entire systems. They can use it for data theft and ransomware. Many firms that use Log4j to work with other programs have already started patching their software. Make sure all your apps and programs are kept up to date, as these should include any patches.
Amazon Refunds: Many of us may be seeking refunds from retailing giant Amazon after the holidays but, if so, ensure you initiate the request. Scammers pretending to be from Amazon are randomly calling victims saying they're entitled to a repayment. All they have to do is provide their bank account details. One couple who did this recently had $60,000 drained from their account.
Cost of Crypto: We already warned about the looming danger of cryptocurrency scams as it takes off in 2022. A new report from market-watchers Chainalysis says crypto crooks stole a total of $7 billion worldwide in 2021, almost double the figure for the prior year. Get proper financial advice before dabbling in crypto.
That's it for today -- we hope you enjoy your week!