Scam vs fraud: What's the difference?

Understanding the difference between a scam and fraud is crucial for protecting yourself against unauthorized activities that could impact your financial and personal security. While both terms are often used interchangeably, they have distinct characteristics that define their nature and the approach needed to handle them.

What is a scam?

A scam involves deceptive practices designed to trick someone into giving away their money, personal information, or valuables willingly. Scams are typically characterized by offering the victim something enticing, like a too-good-to-be-true deal, in exchange for immediate action. The primary aim is to deceive the individual into making a decision under false pretenses.

Examples of scams include:

• Phishing emails asking for sensitive information.

• Fake lotteries or prize draws requiring payment to claim a non-existent prize.

• Investment schemes promising high returns with no risk.

Scams rely on psychological manipulation, exploiting human emotions such as greed, fear, or sympathy to elicit a response.

What is fraud?

Fraud, on the other hand, is a broader legal term describing wrongful or criminal deception intended to result in financial or personal gain. Fraud involves more complex schemes and can be committed without direct interaction with the victim. It often requires a deliberate misrepresentation of facts, which the perpetrator knows to be false, with the intent to persuade another to part with something of value or to surrender a legal right.

Examples of fraud include:

• Identity theft resulting in unauthorized use of credit cards or opening of new accounts.

• Insurance fraud by exaggerating claims or staging accidents.

• Corporate fraud involving manipulation of financial statements.

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Fraud is a criminal offense and is subject to legal prosecution. Victims of fraud may suffer significant financial losses and damage to their credit reputation.

Key differences

The main difference between a scam and fraud is their execution and complexity. Scams are generally simpler and rely on the victim's cooperation, whereas fraud involves more intricate deception and can be perpetrated without the victim's knowledge. Additionally, fraud is explicitly recognized as a criminal activity under the law. Scams might not always involve actions that are illegal but are unethical and dishonest instead.

Protecting yourself from scams and fraud

Scammers and fraudsters are constantly devising new ways to exploit vulnerabilities. However, being informed and vigilant can significantly reduce the risk of falling victim to these deceptive practices. Expanding on the basic principles of safeguarding your personal and financial information, here are actionable tips and useful strategies for staying safe:

Stay informed about common scams and frauds

Regularly educate yourself and your family about the most common types of identity theft, scams, and fraud schemes. Government and consumer protection websites often publish updates on new and prevalent scams.

Use technology to your advantage

• Install reputable antivirus and anti-malware software on all your devices and keep them updated.

• Use email filters to help catch phishing attempts and spam messages.

Safeguard your personal information

• Be cautious about sharing personal information online or over the phone, especially if you did not initiate the contact.

• Use strong, unique passwords for different accounts, and consider using a password manager to keep track of them.

• Enable two-factor authentication (2FA) wherever available for an added layer of security.

• Teach your kids and family internet safety.

Verify before you trust

• If you receive an unsolicited offer or request for personal information, verify the identity of the person or organization by contacting them through official channels.

• Check the legitimacy of websites before making purchases or entering personal information. 

• Look for secure, encrypted connections indicated by "https://" in the web address.

Monitor your financial statements

Regularly review your bank and credit card statements for unauthorized transactions. Set up alerts for unusual activity on your accounts.

Be cautious with investments and offers that seem too good to be true

• Conduct thorough research before investing in any scheme promising high returns with low risk. Consult with a financial advisor if necessary.

• Educate your family members.

• Talk to your family, especially elderly relatives and children, about the importance of privacy and the risks associated with sharing information online.

Know how to respond to suspected fraud

• If you suspect you've been targeted by a scam or have fallen victim to fraud, report it to the relevant authorities immediately. This can include your bank and online banking, local law enforcement, and national consumer protection agencies.

• Learn how to properly report and dispute unauthorized transactions on your credit and banking accounts.

Use social media wisely

• Adjust privacy settings on social media platforms to control who can see your posts and personal information.

• Be skeptical of friend requests from strangers and messages asking for money or personal details, even if they appear to come from someone you know.

Secure your home network

If you suspect that you've been targeted by a scam or have fallen victim to fraud, it's crucial to report the incident as quickly as possible. Doing so not only helps you potentially recover any losses but also aids in preventing others from falling victim to similar schemes. 

Report fraud and scams

Here’s where you can report scams and fraud:

Federal Trade Commission (FTC)

The FTC is a primary agency for collecting complaints about scams and consumer fraud in the United States. You can report scams to the FTC online through their website at FTC Complaint Assistant or by calling the FTC’s Consumer Response Center.

Internet Crime Complaint Center (IC3)

Operated by the FBI, the IC3 accepts online Internet crime complaints from either the actual victim or from a third party to the complainant. If the scam or fraud occurred online, such as through email, social media, or a website, you can file a complaint with IC3 at www.ic3.gov.

Your state’s Attorney General

Each state has an Attorney General’s office that handles consumer complaints, including those related to scams and fraud. Contacting your state’s Attorney General can provide you with state-specific advice and support. You can find contact information for your state's Attorney General's office on their official website.

Better Business Bureau (BBB)

The BBB allows consumers to file complaints about businesses, brands, and charities they feel are engaging in unfair practices. While the BBB doesn’t resolve disputes, filing a complaint with them can alert other consumers about potential scams. Visit the BBB website at www.bbb.org to file a complaint.

The Consumer Financial Protection Bureau (CFPB)

For financial products and services issues, including problems with banks, credit cards, loans, and other financial scams, the CFPB can assist. You can submit a complaint online at www.consumerfinance.gov/complaint.

Federal Communications Commission (FCC)

If the scam involves communication services, like unwanted calls, text messages, or internet services, reporting to the FCC is appropriate. They collect data on unlawful communications to aid in policy-making and enforcement. Report issues via their website at the FCC Complaint Center.

Social media platforms

For scams encountered on social media platforms, such as fake profiles or phishing messages, it’s beneficial to report these directly to the platform. Most social media services have reporting tools for users to report suspicious activities and violations of their terms of service.

Local law enforcement

If you’ve lost money or believe you’re a victim of a serious fraud scheme, contacting your local police or sheriff’s department to file a report is a good step. They can offer advice and may investigate if the fraud is part of a larger criminal activity affecting your community.

The sooner you report a scam or fraud, the better your chances of mitigating the damage and potentially helping to catch the fraudsters. Keep detailed records of your interactions, including emails, messages, and transaction details, as they can be crucial for investigations.

By implementing these strategies and maintaining a proactive stance toward your personal and financial security, you can create a robust defense against scams and fraud. Remember, vigilance and education are your best allies in protecting yourself and your loved ones from these deceptive practices.

This blog post is provided "as is" and should not be relied upon as a substitute for professional advice. Some content in this post may have been created using artificial intelligence; however, every blog post is reviewed by at least two human editors.