Understanding the Difference Between Frauds and Scams

May 10, 2021 3:25:07 PM

There are plenty of similarities between frauds and scams, and probably the biggest similarity is – you don’t want to be a victim of either! However, when it comes to protecting yourself and your finances, it’s also important to understand the differences between the two. What’s a fraud and what’s a scam? How are they similar and different, and how can you avoid them?

Definitions: Fraud vs. Scam

Colloquially, the terms “fraud” and “scam” are used interchangeably to refer to any kind of financial wrongdoing. Legally speaking, fraud usually refers to a broader and more serious crime, with scams representing one type of fraud.

A good example is elder fraud, which unfortunately continues to be a major problem affecting millions of Americans every year. Under the broad category of elder fraud, specific scams include lottery scams, in which victims are asked to pay a fee to access their windfall; romance scams, capitalizing on victims’ desires to find a companion; and tech support scams, wherein criminals attempt to gain remote access to a computer or cell phone.

Other types of fraud include charity and disaster fraud, credit card fraud, impersonation fraud, investment fraud, and more. In order to protect ourselves and our loved ones, it’s a good idea to speak up about the overarching problem of fraud in general, as well as to discuss specific scams to look out for – while keeping in mind that scammers are revising their strategies all the time.

Common Frauds and Scams

Sadly, the coronavirus pandemic has led to a number of new scams. Watch out for funeral expense scams where criminals pose as officers from the Federal Emergency Management Agency (FEMA) and request personal details to help you register for funeral expense benefits; vaccine scams claiming to offer early access to the inoculation for a fee; and Social Security scams in which the scammer will falsely say that benefits can’t be paid out during the pandemic unless they receive personal information or a mailed-in fee.

Digital fraud is a broad category encompassing many of the most common types of scams, such as phishing emails, malware, and identity theft via a compromised email account. While not all internet fraud can be avoided – especially where large-scale data breaches are concerned – it is possible to protect yourself from internet scams by taking a few simple precautions. Don’t open emails or online messages from senders you don’t recognize, and beware of sender addresses that look official but include one or two odd characters or a spelling mistake. If you receive any digital communication asking for money, personal information, or directing you to download an attachment – proceed with caution and don’t act in haste. Scammers rely on victims’ panic to cloud their judgement, so if you feel any kind of pressure, this is a good sign that a scam might be afoot.

While online fraud is a common way for scammers to find new victims, it’s equally important to be on the lookout for scams taking place on more traditional communication channels. Whether it’s a telephone call from a strange number or a piece of snail mail from an organization that sounds legitimate, the best course of action is almost always the same: don’t act fast, don’t share personal or financial information, take the time to verify who’s contacting you, and if you need, re-initiate the conversation through an official channel to get more information.

What Happens Next?

When you’re impacted by a fraud or scam, call up your credit union, bank, or credit card issuer to confirm if any money has been stolen and to get their assistance in blocking access to your accounts. If you suspect identity theft, you can request a free security freeze to prevent the scammer from opening any lines of credit in your name. No matter what kind of fraud or scam you’re facing, it’s always a good idea to say something to someone you trust, as soon as possible.

You can help other potential victims by reporting the fraud to the Federal Trade Commission (FTC) at https://reportfraud.ftc.gov. The FTC also publishes information about fraud, unwanted calls, and other consumer issues currently affecting people in your state and around the country – a useful resource if you want to learn more about what scams to watch out for.