Types of fraud: a parent's guide to keeping your money safe

Criminals and scammers have many ways of targeting unsuspecting consumers. One way of keeping yourself, your kids, and your accounts safe is learning how to identify different types of fraud. This blog breaks down what you need to look out for in order to effectively protect yourself and your family against fraudulent activities.

Introduction to types of fraud

What is fraud?

Fraud refers to someone intentionally deceiving another person for financial gain. Fraudsters typically use trickery to obtain information that they can use to access your money. For example, a scammer can pretend to be from a federal agency, like the IRS, and solicit your credit and debit card information through email or text messaging (also known as SMS). According to the Federal Trade Commission (FTC), consumers lost over $8.8 billion to fraud last year.

Examples of common types of fraud

Of the many types of fraud, the most common are identity fraud, tax fraud, wire fraud, mail fraud, and investment fraud. Your first line of defense against these fraudulent activities is equipping yourself with enough knowledge that can help you recognize, identify, and avert the danger.

Protecting yourself from identity fraud

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What is identity fraud?

Identity fraud is when someone steals your personal information and uses it for their financial gain. There are many scams that someone can attempt while posing as you. They can try to access your accounts, forge documents in your name, obtain loans and leases, get medical services, open new accounts, or even solicit cash from other people, particularly your friends and family.

Identity theft happens in three main ways:

• A criminal can steal your identification documents, bank cards, credit cards, tax documents, and/or bank statements and use them to pose as you.

• A criminal may steal your information by installing skimmers on consumer machines like registers, ATMs, and fuel pumps.

• Hackers may find data breaches that expose your personal information and passwords. Some use email and SMS phishing, while others may obtain your info from social media platforms. 

How can you protect yourself from identity theft?

To avoid falling victim to identity theft, store personal documents safely so they can’t accidentally land in the wrong hands. Keep your digital footprint as private as possible. Don’t overshare personal information like addresses and card details on social media platforms or when using a public internet connection. Frequently review your bank and credit card statements to ensure that there are no suspicious activities. Make sure your passwords are strong and not easy to guess.

To add an extra layer of security, consider using financial accounts and apps that come with identity theft protection. Greenlight’s Max and Infinity plans both include identity theft protection.

Detecting and preventing tax fraud

What is tax fraud?

Tax fraud is when an individual or business intentionally falsifies information on tax returns to avoid paying all or part of their tax obligation. Tax fraud takes many shapes, including underreporting returns and dishonestly filing for deductions.

Beyond that, you may be a victim of tax fraud through tax return identity theft. This happens when someone steals and uses your personal information to file fraudulent returns and/or claim a refund or credit.

How can you prevent tax fraud?

It’s important to learn about filing taxes so that you can file accurate and timely returns according to the IRS’ requirements. Do not underreport, and don’t claim unearned credits or refunds.

To avoid falling victim to tax return identity theft, always keep your personal tax information private. This includes your Social Security number and Social Security card. Beware of hacking, phishing, and solicitation schemes from people who may be trying to steal your tax details. Consider using safe e-filing accounts, and don’t forget to keep your passwords private.

Tips to prevent wire fraud

What is wire fraud?

Wire fraud involves scamming people through telecommunications like phone calls, emails, faxes, messaging apps, or SMS. In most cases, the criminal will use a call or text to trick someone into sending them money or private information. But keep in mind that a transaction doesn’t necessarily need to occur for it to be fraud. The mere intention of defrauding someone makes you criminally liable for wire fraud.

Steps to protect yourself from wire fraud

To avoid wire fraud, be cautious of random calls or messages and always verify the legitimacy of any communication that involves a monetary transaction or exchange of sensitive information. You can also use a transaction monitoring tool that will notify you when you’re about to approve or complete a suspicious transaction. Always remember to report any suspected cases of wire fraud to relevant authorities.

Recognizing mail and investment fraud

What is mail fraud?

Mail fraud involves defrauding people through the Postal Service. Generally, criminals send solicitation offers to unsuspecting individuals (including kids) with the intention of perpetrating fraud.

What is investment fraud?

Investment fraud is when someone intentionally deceives or misleads an investor in order to get a financial gain. It’s a white-collar crime that involves investment deals and proposals that are too good to be true. The scammer may make up a fake investment or provide false information about a real investment. Some common types of investment fraud include Ponzi schemes, pyramid schemes, pump and dump, false high-yield investment schemes, and unsuitable financial products (like a misrepresented annuity).

How can you avoid mail and investment fraud?

The easiest way to avoid mail fraud is to keep your financial information private and secure from mail solicitations. Don’t share your credit card details, Social Security number, or bank info, especially with people you don’t know. Mail scammers may also pose as telemarketers, so consider using a call-blocking service to block telemarketing calls.

When it comes to investment fraud, the best way to avoid it is by identifying it before it happens. There are several signs to look out for. One red flag is a promise that an investment will earn you a lot of money in a short time with little to no effort on your part. Also, avoid entering deals with salespeople who are extremely pushy and want you to commit money right away. Perhaps more importantly, always do due diligence before putting your money into any investment.

Scammers can also target kids and try to convince them into giving information about their parents and older siblings, so it’s important to teach your teens and kids to never give any information to strangers. Introduce them to the Greenlight app early to help them build a foundation for making smart investments and keep them safe from fraudsters. Beyond Greenlight’s identity protection — the in-app safety features are designed to keep teens and kids safe.

The final word on fraud

Although it is rampant, fraud is avoidable. You can help shield yourself and your family from the emotional and financial stress of fraud by learning how to recognize, identify, and avoid it before it happens. Unfortunately, however, even if you're constantly on guard, scammers never stop looking for new ways to get your money. 

That’s why Greenlight offers identity theft protection with Max and Infinity plans. This smart tool comes with handy security features including theft monitoring, alerting, and restoration for your entire family. Sign up today and take advantage of Greenlight’s money app that’s safe for parents, kids, and teens.