How to avoid credit card scams and other tricks: Internet Scambusters #1,121
Credit cards are a potentially costly way to buy stuff and run your finances if you don’t always clear your debt.
But they can turn out to be even more expensive than you thought if you fall for a scam offer or fail to spot hidden fees and other tricks.
In this week’s issue, we’ll highlight the 5 most common dubious card offer practices and what you can do to avoid them.
Let's get started…
These Credit Card Offers Could Land You In Trouble
Looking for a new credit card? Then, watch out! That great special offer you spotted could be a fake. Or it could be a disguise, concealing overpriced interest rates and hidden fees. Or the comparison site where you saw it may be taking kickbacks for recommending it.
Shopping for a new card can be a daunting task and, with average interest rates on legitimate cards already peaking at around 24% per year, you can’t afford to make a mistake.
Here are the 5 biggest credit card tricks to watch out for:
- Fake card offers: This is usually a phishing trick to get you to hand over confidential financial information such as bank details, Social Security numbers, income, home ownership, and net worth. Sometimes, scammers use similar tricks by pretending to sell you credit card insurance. They may also use fake websites disguised to look like established and reputable banks, even copying logos. Sometimes, what a consumer thought was a credit card turns out to be a shopper or store card, which restricts where it can be used.
- Recommendation kickbacks: Earlier this year, the US Consumer Finance Protection Bureau (CFPB) warned that some comparison sites and even individual financial advisors may be taking undisclosed payments from card issuers for promoting their products. They may receive direct upfront cash payments to promote certain cards, commissions after a card is issued, or a cut from each user transaction.
- Hidden fees: Many card issuers charge fees for things like overseas transactions, balance transfers, and late payments. And, of course, some cards have annual fees, usually between $100 to $500 for the perks that come with it. But sometimes these costs are hidden in the small print or not even disclosed at all – until you get your bill. In a case some years ago (reported by the Wall Street Journal), new card holders were charged $250 before they were allowed to use their card.
- Generous introductory offers: Offers of zero interest for balance transfers, zero fees for an otherwise expensive card, and a high credit limit. There may be other incentives, like discounts from certain retailers. All of these may be perfectly legitimate – or not. It’s what happens after the initial deal expires that matters; you could find yourself paying a high interest rate or other fees.
- Pre-approval lies: How often have you been told by email, text messages, and on websites that you’ve been pre-approved for a card? Unless you already have an established relationship with a financial institution, which knows all about your money activities, how can they do this? Most likely they can’t; it’s just a come-on to lure you into applying, and the result may be over-priced interest rates, theft of your personal information, or a kickback to whoever offered it.
How To Avoid A Credit Card Rip-Off
Not all of the dubious practices we’ve listed above are necessarily scams, but they can still deceive the unwary consumer, landing you with an unwelcome financial burden or debt headache.
Here are some of the actions you can take to avoid a rip-off:
- Make sure you know what happens after any initial free or incentive period ends.
- Ask any organization or advisor if they receive any commission or other reward for recommending a particular card.
- Read the card issuer's terms and conditions. It's a tedious business but you absolutely must do this.
- Monitor your credit record and score with the big credit rating agencies.
- Be cautious about unsolicited card offers, especially those offering a lower rate than you're currently paying. Use an online search to check the card issuer and then contact them directly to find out if the offer is genuine and how long it lasts.
- Don't provide any personal, confidential information until you know for sure the issuer and the deal being offered are genuine.
- Don't yield to pressure to act urgently. Scammers may follow up an initial inquiry with phone calls trying to force you to commit to their offer.
- Don't click on links in ads and messages offering an attractive card deal. Go directly to the issuer's website and check things out there. And always check that the address you type into your browser is correct.
- Always check your monthly credit card bill for fees and other transactions you don't recognize.
- Never pay upfront to get or use a card.
The CFPB says it’s developing a tool that will help consumers genuinely compare card rates and fees. And federal laws, notably the Truth in Lending Act, require card issuers to clearly state their rates, fees, and other terms – but that doesn’t stop scammers from ignoring them. And the rules don’t address the kickback issue.
Also, it’s not just little or unknown financial organizations that could be ripping you off. A few years ago, one of America’s biggest banks was found to be creating card and other accounts without individuals’ authorization.
So, take the time to do your research and, as usual, beware of credit card deals that seem too good to be true.
This Week’s Alerts
Political robocalls: Election campaigning will move into high gear in the coming months and your phone may start ringing “off the hook” with solicitations. Political parties are exempted from the restrictions of the Do Not Call register, but automated robocalls are not. Ignore them. And even if a real person calls you, remember you have no way of knowing who the caller really is or if your caller ID is genuine. The Federal Communications Commission (FCC) recently issued a $6 million fine to an alleged scammer who used artificial intelligence to mimic the voice of President Joe Biden.
No upgrade: If you’re planning a cruise vacation this year, don’t fall for a piece of fake news currently making the rounds that claims you can get a free upgrade from an inside to an outside room by telling the front desk you’re claustrophobic and frightened. It doesn’t work, says Carnival Cruise Line’s brand ambassador John Heald.
That's it for today -- we hope you enjoy your week!