PROTECT YOURSELF FROM Fraud

HOW TO PROTECT
YOURSELF FROM Fraud

YOU may have heard the saying, “You can’t cheat an honest man.” Like many sayings, that one is untrue. Every day honest people are the victims of fraud; honesty alone doesn’t protect them. Some of the cleverest minds in the world are devising and carrying out schemes to separate people from their money. More than a hundred years ago, one writer noted: “There are some frauds so well conducted, that it would be stupidity not to be deceived by them.”

Deception has a long history, dating back years from people to governments Old schemes have many variations, and new schemes are being concocted all the time. So how can you defend yourself? You need not try to learn all the ways in which criminals defraud people. A few basic precautions will go a long way in protecting you from becoming a victim.

Safeguard Personal Information

If a person steals your checkbook or credit cards, he can buy things with them. If he steals your bank account information, he may be able to order and write checks in your name. If he obtains enough personal information, he may assume your identity. Once your identity has been stolen, a criminal can withdraw money from your bank accounts, charge things to your credit card accounts, and obtain loans in your name.* You may even find yourself arrested for a crime you did not commit!

To protect yourself from this type of fraud, be careful with all personal documents, including your bank statements and checkbooks, driver’s license, and Social Security card or national identity card. Refuse to provide personal or financial information to others unless there is a legitimate reason why they should have it. This is especially so for credit card numbers and bank account information. The only time you should give anyone your credit card number is when you want to buy something with it.

Swindlers known as dumpster divers root through garbage in search of such information. Instead of simply throwing out paperwork that contains personal data, you are wise to burn or shred it. This includes used checks and bank and brokerage statements as well as old credit cards, driver’s licenses, and passports. It is also wise to destroy unsolicited credit card applications that you receive in the mail, since these contain information about you that someone else might misuse.

Use Common Sense

At the heart of many frauds is the promise of unrealistically high returns from investments. A common get-rich-quick scam is the pyramid scheme. Though there are many variations of this scam, the usual design is for investors to recruit other investors, for which the recruiters receive a commission.^# Chain letters work in the same way by asking you to send money to people at the top of a list. The assurance is that you will receive thousands of dollars when your name reaches the top.

Pyramid schemes always collapse because it is impossible to keep on recruiting new members. Consider the math. If five people launch a pyramid and each one recruits five more, the number of new recruits becomes 25. If they, in turn, each recruit 5, that would mean 125 more. When recruitment reaches the ninth level, there will be close to two million people who would have to recruit more than nine million others! Promoters of pyramid schemes well know that there is a saturation point. When they suspect that point is near, they take the money and run. You will probably lose your money, and those whom you have recruited will now be trying to recover their lost money from you. Remember, for you to make money in a pyramid scheme, someone else has to lose money.