Desperate times often lead to desperate measures. I've noticed several money scams during COVID-19 we should all be aware of. If you know of more money scams, please share them in the comments section below.
It makes me so mad that there are scammers out there. I've been scammed before, and it felt terrible. But at least when I was scammed I was younger and it wasn't for a lot of money. After I was scammed, I became much more vigilant.
Some Previous Attempted Money Scams
One time, this random guy came up to me at a grocery store parking lot and said he had a $10,000 home theatre system he was willing to sell to me for just $500. Curious, I had him show me the goods. The brand was some high-end sounding, no-name brand. He happened to have an extra set he could offload for cheap without his manager finding out. Pass.
Another time, someone on Craigslist was selling a car for 50% below book value so I reached out. After e-mailing back and forth, he wanted me to wire him $5,000 to an escrow site to secure the purchase. I got on the phone with him and he clearly wasn't based in the Bay Area. When I asked him, he said he was on a business trip in Tel Aviv, but was coming back soon. I passed.
Money scammers are everywhere! Beware! The easiest way to never get scammed is to never buy anything. Alas, money is meant to be spent on a better life.
Money Scams During COVID-19
The first money scam really isn't a money scam. It's more a crafty way of doing business that everybody should be aware of.
I don't blame business owners for trying to extract more money out of their customers during a pandemic. However, consumers must be aware of price gouging.
Price Gouging At The Auto Shop
One of the good things about the pandemic is less driving. I was going to get new tires at the end of last year because the tread was getting close to the wear bar. However, since my driving has gone way down, my tires have lasted much longer.
When I called my local auto shop to get a quote, they said that my tires had increased in price from about $350 last year to $475 each. After tax, mounting, and a disposal fee, the total cost to get two new tires would be $1,080!
What the hell? I know my 22-inch 275/40R M&S tires by Continental are expensive, but not THAT expensive.
I asked the auto shop whether they were sure this was the best they could do. They said, yes, since prices have gone up since last year. They said I could get $50 off, but that's it. I told them I'd think about it.
After we hung up, I looked online at a couple tire websites. The tires were priced at $335 before tax, mounting, and disposal fees. Therefore, the total cost for two installed tires would be closer to $830 instead of $1,030 after my $50 “discount.”
So I went back to the auto shop and asked them to price match. The guy said he doesn't have the authority and their dealer price is what it is. I told him OK and hung up. He wasn't getting my business, despite being in the neighborhood.
An hour later the auto guy called back and said he could do it for $880. Now that's more like it! Although $880 was still about $50 more than what I could get if I went to a shop farther away, I decided $880 was good enough.
It's A Numbers Game
Here's the thing folks. Many businesses will purposefully quote you a much higher price. They've figured out that a certain percentage of the time, the customer will just say yes, not thinking anything is wrong.
Some customers will know the quoted price is on the high side but still say yes out of convenience. I'm such a customer because I highly value my time. Finally, another percentage of customers will do their research online and ask for a price match.
So long as the business is courteous and strives to match the requests of customers who do their due diligence, the business may do comparatively better than a competing business that always offers the lowest price to its customers.
Always be the customer who does his or her research online. It doesn't matter whether you're getting competing quotes for tires, life insurance, or mortgage rates. Chances are high, if you don't shop around, you are paying too much.
For years, my wife thought she had an OK life insurance deal with USAA for $60/month for a $500,000 term policy. We just trusted USAA to provide us the best rates since I've been a member since 2000. However, one day, I told her my $1 million term life insurance policy cost only $40/month. Given she was younger than me and just as healthy, we decided to shop online.
It turns out, USAA wasn't the best rate at all. She was able to get a new $1 million term life policy for $52 thanks to PolicyGenius. In other words, she got double the coverage for less. This is why price comparison sites have flourished.
False Advertising
The second money scam is false advertising online. It's much worse than the false advertising McDonald's has for its burgers on TV. Some people are creating convincing video ads to sell generic crappy products under newly created brands. It's legal, but the products are terrible.
These video ads are aggressively popping up all over Twitter and Facebook with products that look enticing to people stuck at home. Some examples include caulk that instantly kills bathroom mold, a water balloon bubble blob for your kids, and a liquid that instantly fixes glass cracks.
Unfortunately, none of these products work as advertised. Even though the below pictured product looked too good to be true, I bought this water balloon bubble blob for my son to play with outside this summer. The cost was $23 after taxes, shipping & handling. Not that big of a risk if the product turned out to be a dud.
Instead of getting what was advertised in the picture above (video made it look more amazing), all I got was basically a thicker skin balloon I could have bought for a buck at Walgreens. The product was so sad. But what was more sad was that I failed to provide something fun for my boy during lockdown.
Therefore, of course I contested the product with my rewards credit card with fraud protection and got my money back. But just like with my tire pricing example, you know a good percentage of disappointed customers don't bother asking for a refund.
A Note On Secure Websites
If you are going to transact online, the website needs to be HTTPS secure. You can find out by looking at the very left of the URL field in your browser and see if the URL starts with HTTPS or has a lock symbol. If not, the website is more vulnerable.
HTTPS stands for Hypertext Transfer Protocol Secure. It is used for authentication, privacy, and integrity of the exchanged data while in transit. HTTPS protects against man-in-the-middle attacks, eavesdropping, and tampering. Financial Samurai is HTTPS secure, even though this isn't an e-commerce site.
Unemployment Benefits Fraud
One day, I noticed I was getting a ton of mail at a property I was listing for rent. Every single envelope came from the California Employment Development Department (EDD).
Most envelopes had different names on them all with my rental property address. But some envelopes had the same name twice. In one out of every 4-5 envelopes, I could feel there was an unemployment debit card inside.
Then one evening, during the barrage of EDD letters, I got a call from a shady sounding man claiming that he had sent an envelope to my address by mistake. He had gotten my number because I had listed it on the Zillow Rental App, which was a mistake on my part.
The shady guy first said he had accidentally sent his Carfax data to my address. As I pressed further, he said it was actually his unemployment benefits. When I asked him his name, he said one name, which I told him didn't match any of the envelopes in my possession.
He hung up and then called me back and identified the name on one of my envelopes. I asked him why he gave me a different name, and he said it's because I sounded very intimidating.
He then said he would pay me money if I could send him the envelope. I asked him how much and he said, “How about $1,000?”
By this time, I knew this was obviously an complete identity theft/unemployment benefits money scam. With the enhanced unemployment benefits of $600/week plus the usual unemployment benefits, scammers are coming out of the woodwork!
Report The Unemployment Benefits Scam
I met up with my local mailman to tell him about the scam and had him return all the envelopes to the EDD. Then I reported the scam online to the EDD with the victim's names. I really hope the EDD rectifies the situation.
If these are real people who are unemployed and need the money to survive, it is absolutely terrible what these money scammers are doing! You constantly read reports about how some unemployed people have still not received any benefits months after applying. I've got to imagine it's partially because of these money scammers.
If you are still waiting on your unemployment benefits, please call the EDD and let them know you may be a victim of the scam. If you are receiving a barrage of EDD letters addressed to random names at your home, please know this is a scam and send them back to the EDD ASAP.
Wire Fraud Scam When Buying A Home
Finally, I want to highlight a wire fraud scam a reader sent me after reading my post, Real Estate Buying Strategies During COVID-19.
I want to spread awareness amongst people purchasing or selling houses regarding the huge increase in wire frauds. Most transactions are happening virtually during the pandemic.
I had a recent experience where my relative was in the process of purchasing his first house. One day before settlement (Friday) he received wire instructions from the title company to transfer the down payment and closing costs.
On settlement day, the following Monday, they are at the table signing documents, when the title company asks for the cashiers check. When my relative told the title company the money had been already wired, he finds out that the title company had never sent any wiring instructions!
It turns out that scammers had intercepted their email communication, quietly monitoring everything, and waited for the perfect time to spoof title company’s email and get the money. By the time the buyer realized all this it was too late and all his savings were permanently gone.
Can you imagine hearing that? Turns out that this happens to thousands of people every year in the US and there have been no regulations placed to protect consumers.
This has happened to buyers, sellers, refinancing with cash out, and all sorts of transactions, so folks please be aware and careful.
Holy crap! This money scam is one of the most sophisticated and worst types of money scams I have ever heard of. I have bought and sold multiple homes in the past, and the earnest money deposit and remaining down payment deposit has always been sent through a wire transfer. This is big money.
Triple Check Before Sending Money
Before I send a wire transfer, I get an e-mail from the title officer saying an encrypted e-mail with the instructions have been sent. After getting the instructions, then I get a call from the title officer repeating the instructions to me. This is to ensure everything is legit.
Even after all these precautions, I have wondered how do I really know for sure the wire transfer instructions are legit. Therefore, I end up Googling the title officer's name, company, and bank account numbers for one last check before sending the money.
So far, I haven't been the victim of a wire fraud scam. Just know that once you send a wire transfer, it is extremely difficult to recover the money. Therefore, you must triple check everything is legit before sending any money.
Money Scams Are Only Going To Increase
The longer the lockdowns and the pandemic go on, the more money scams there will be.
Already, over $1 billion in Paycheck Protection Program money has been improperly sent to illegitimate small businesses. Surely even more PPP fraud has yet to be uncovered.
My sincere hope is that more money scammers will decide to make an honest living. It can't feel good to scam people out of their hard-earned money. The people who scam seniors out of their retirements savings are some of the worst.
Before buying anything or sending money to anyone, please research the product and the organization receiving money. The longer the organization has been around and the more positive reviews the better.
Please also make sure the website you plan to purchase on is HTTPS secure. Finally, use a rewards credit card or a payment tool like Paypal with fraud protection. Having a large financial institution in your corner during a dispute is always great.
My favorite rewards credit card is the Chase Freedom Unlimited® card because it provides 1.5% unlimited cash back, charges no annual fee, and has a good purchase protection plan. You also earn a $200 Bonus after you spend $500 on purchases in your first three months from account opening.
Have you experienced any money scams before? If so, what happened and how was it resolved? Besides never spending money, how else can you avoid money scams?
These kinds of theft will continue until there is meaningful punishment for those who are caught, tried and convicted. When I say meaningful I mean firing squad meaningful. Same holds true for drunk driving, pedophilia, and rape. Done and done does the job.
Sam, I hate to say this, but I predict there will be much more “gouging” by those unskilled non-WFH workers who are in limited numbers, much to the bewilderment of white-collar workers. Might want to add knowing some of critical skills to things needed in order to become a millionaire, since prices of those services may soon overwhelm a savings and earning strategy. And I also hate to say it, but those workers have earned it by sticking with their skills while society pressures everyone to go to college. I asked my cousin, who is an HVAC repairman, how much he charges, and he said as much as he can get. He said $600 just to show up, and maybe do nothing other than point out the thermostat was set wrong. I doubt people can pressure Congress to investigate that.
You would honestly think if scammers instead focused their efforts on a legitimate side hustle they would probably end up making more money and wouldn’t be breaking the law or ripping people off to do it.
I work at a very large retail bank. I’ve seen so many different types of scams, but what is more shocking is the amount of people who fall for them. Customers give out their bank name & account numbers, PIN numbers, online passwords, debit card numbers plus the 3-digit security code on the back of the card to people who call them, text them or email them. NO bank employee will ever ask a customer for their PIN number or passwords – EVER!!
I tell every bank customer to never reply to a phone call, an email or text from their bank. If it’s a phone call, say thanks and hangout and call your bank’s customer service number. If it’s an email, never click on the link within the email – no matter how legitimate or urgent the email looks or sounds. Clicking on the link and then logging into your online bank account if it’s a scam, you just gave the scammer your username and password. Instead, either call your bank’s customer service number or go to your bank’s website from your browser and log in and go to your message inbox. If it’s a text, again, don’t reply and instead call your bank’s customer service number. I’m shocked how many customers don’t have their bank’s 24 hour customer service number in their phone. It’s your money – protect it.
For wire fraud: If you can’t physically go to the company who is handling your closing and pick up the wiring instructions in person, then as soon as you know who the company is that is handling your closing, you should obtain their phone number and develop somewhat of a relationship with an employee so you will know that employee by their voice and you can call the employee to verify the wiring instructions. You should never trust anything that is within the instructions – especially the phone number and account number – or trust anyone calling you to verify the wire instructions. If your real estate agent emails you the wiring instructions, verify them yourself. Don’t trust that they took precautions to safeguard your money. Most companies now will only provide you with the last 4 digits of the account number so you have to call them before you wire out your funds. Again, know who you are talking to when you call to verify the wire instructions.
Another scam that is prevalent is the scammers getting your bank account number & routing number and then setting up bank to bank transfers. When you legitimately set up a transfer from your bank to another bank, the new receiving bank will make a deposit into your bank account always in an amount under $1.00. You will then go into the account of the new bank and verify the deposit amount made into your bank account. Once you verify the amount, the new bank account is ready to receive transfers – that’s when the fraud starts. Scammers steal the identity of a person and then they open a new account online using the unsuspected person’s personal information and set up immediately the bank to bank transfers. I just helped a client who had two different banks deposit amounts less than $1.00 and then $5k was transferred out of his account. Everyone should look at their bank accounts everyday for deposits & withdrawals. Scammers get away with this type of fraud because they know people don’t look at their accounts. Some customers only look at their bank account transactions once a month when their statements come out. Anything that you know you didn’t do should be reported immediately to your bank. Setting up account notifications is a great way to prevent bank fraud. If you have to send a check, use online bill pay. Your account number is not on the bill pay check and in many cases, your bill pay check was turned into an ACH and the check was never mailed. If you like to send your personal checks, only print your name on your checks and leave your address and phone off. Why give out more personal information than you need to.
I absolutely believe why many people fall for scams. People are convincing and people have made phishing e-mails and websites look very convincing. I just got an scam e-mail from Paypal saying my account was locked up due to a scam and that i needed to log on to unlock. Of course, the website was not Paypal’s.
“If it’s an email, never click on the link within the email – no matter how legitimate or urgent the email looks or sounds.”
Yes sir!
The sad thing is, the pandemic is causing these scams to thrive b/c there are less in person meetings. Scamming people for convenience has become big business.
One question I have for you: if you are a victim of a wire fraud scam, why can’t the customer easily get his/her money back? The recipient of the wire fraud money had to have set up an account/name etc. Why can’t law enforcement just go after them?
You can always request the funds back, but if it’s a scam, the scammer quickly moves the funds out of the account so the receiving bank has nothing to send back. For wires, the customer signs off that all the information in the wire is correct, so if you send it to someone who is scamming you, unfortunately you are out of luck. The scammers aren’t setting up online bank accounts using their real name, address and social security number. Unfortunately, they are stealing the identity of a legitimate person to set up the account unbeknownst to the identity theft victim until it’s too late. I’ve seen bank accounts that are not legitimate and the funds that get wired in or transferred in are quickly transferred out into cryptocurrency online accounts. Who is law enforcement going to go after?
Sam,
I flip and own rental houses up in the Seattle area. The fraud of proceeds or down payments when purchasing homes has been going on for a few years now. When I buy a house or sell a house flip I never, never have the funds wired. When buying I always take a cashiers check with me to the closing and when I sell a flip or rental I always defer the wiring to my account to pick up the cashiers check the next day at the title company after it has recoded. The horror stories are real. They actually have you sign a form at the closing stating how you want to receive your proceeds at the closing and you keep a copy of it. I highly recommend to either carry cashiers check for your down payment or cash purchase when buying and if selling to receive proceeds in cashiers check when receiving proceeds. Would rather go back the next day to receive cashiers check after it records than deal w/potential list proceeds. Do not have funds wired!
There is a lot of fraud with cashiers checks too. Also, the seller depositing a large cashiers check would have to in most cases wait until their funds are available which can be 10 days. Closings in my area do not allow cashiers checks – only wires.
That’s a good point about closings allowing cashier’s checks or not b/c time is of the essence and many things can get delayed in escrow if it takes that long for a cashier’s check to cash. But I’m sure everything is negotiable too. 10 days seems like a long time.. 3-4 days max here in SF.
Good advice. A cashier’s check is more PITA for some b/c you have to go to the bank, get one, then carry it around. If you lose it, you’re kinda screwed. Banks never give you reassurances that you can get that money back. Why? I need to do more digging.
If you lose a cashiers check, you can get your money back. The bank will first see if the cashiers check was cashed. If it was, you’re out of luck. If it wasn’t, the funds can be credited back to your account. It doesn’t happen the same day, but you can get your money back.
If I’m buying I stop at the bank on the way to sign at the closing. If I’m selling, the title company calls me the next day after the property has recorded and I go pick up the check and go straight to the bank to deposit. It has been very smooth each time. I can see the inconvenience for some, but when it’s a six figure check every time it’s not a bother is my view.
oh man, I HATE money scammers and they are frikin’ everywhere. I am in shock about that poor guy who lost the money for his house. OMG. That is so unbelievably evil I can’t even process it. How do you recover mentally from something like that? Man I will be extra extra careful from now on before I ever wire anything anywhere.
I too have noticed a HUGE uptick in false advertising of cheap products. I ordered an affordable, customized necklace this spring once that was supposed to arrive in 2 weeks. Fast forward 1.5 months later and nothing. I started hounding the seller and they kept claiming it was on the way.
They were blaming covid for the shipping delays. But I think they were just hoping customers like me would forget we ever ordered it and wouldn’t press. Finally after laying on my angst thick day after day, I eventually got it in the mail. I noticed the ship date was just 3 days prior. Clearly they only sent it to me because I wasn’t giving up and was telling them I’d report them for fraud and would get their website taken down.
Obviously the EDD and wire fraud scams are much worse. But nobody wants to be taken advantage of. Definitely don’t trust social media sites advertising cheap products that look too good to be true. And utilize your buyers and fraud protections! Stay safe everyone and protect your money!
Yes…. someone is getting rich out there doing OEM products from China or whatever, charging a huge markup in the U.S. and selling boatloads.
Check the Twitter establishment date for the advertisers. Many are from March – July 2020. All crappy products.
Thank you for helping raise awareness.
I had a similar situation with my car tires this year- they were at about 50% tread and I ruined the side wall of one of the front tires. Because the tire size is kind of odd it is difficult to get comparative pricing between garages because they play games about how much it costs to bring the tires in. Anyway, I paid $1200 CDN for 4 new tires in 2018, this year I replaced the front 2 + oil change was $1050. So I think it was around $750 just for 2 tires, ouch.
We got taken for a ride on windows 2 years ago for a house we were renovating. We almost always hire tradespeople for cash rather than go through companies. This is obviously risky, but we have come out ahead in the long term. Anyway, we did our due diligence by calling his other customers, checking background, taking identification info, looking at pictures. We paid a few thousand and the guy never returned. I wanted to report him, but my husband refused concluding that is the risk we took and the police have better things to do so it is best we move on.
We bought a dog for our in-laws at Christmas time. It was actually a huge challenge because there are so many fraudulent puppy scams. It used to be you could secure a small dog through adoption/ rescue for a couple hundred admin fee. Well, that market has been totally commodified and no such deals exist anymore (at least in Western Canada). We didn’t actually fall victim, but it took a lot of work to even locate an online ad that was genuine in selling a real puppy. We gave nothing up front and drove 2 hours to where the breeder was located to finally get the dog.
It’s totally embarrassing to get screwed over, but sometimes that is life in the fast lane. We can only keep trying our best to stay vigilant and aware!
Buying and selling on eBay right now is like the Wild West of scammers. I’ve been off loading items I no longer want due to being stuck at home and wanting to clean up the house during the pandemic. It has resulted in constant scam messages and folks purchasing items but “having trouble paying”. If you’re selling items online right now never send the item until you can see the confirmed funds in your account and I’d recommend only selling relatively low value items. If you’d like to see this type of activity in action though, learn details about online payments, and how to research the legitimacy of online buyers; listing on eBay can be really interesting right now.
That said, selling online can help set you up for the “at-home” period we’re in. We’ve already been able to buy a rowing machine and equipment for streaming/podcasting using proceeds from eBay sales to help support being healthy without a gym sand other potential income streams outside of the W2 and real estate.
Good to know. Hopefully eBay can do more to combat the scams.
I would love to interview a money scammer and try and figure out how they decided to scam people one day.
Scammers seem to target “new” sellers with very little to no feedback. I’ve been an Ebay seller since 2003 and truly can’t think of the last time I was scammed. (I have an Ebay store subscription)
A very useful post. Another scam is fake fly-by-night e-commerce websites advertising products that everyone wants at too good a price. I recently purchased a efurbished gaming device for my daughter from a .XYZ domain website. Thought I was protected since I used PayPal, but the price was 1/4th of even the lowest on eBay. As feared, the product never showed up and what I got 30 days later was a an empty bogus shipment from China. Unfortunately since the claims window had passed PayPal wasn’t much help either ! Buyers beware and definitely not buying from any website with an .XYZ domain
Ah, another strategy to delay shipping so it is outside the 30-day claims window for payment companies like Paypal etc.
Good to know!
Hopefully this will help spread awareness! Unfortunately, scammers will still be out there and vulnerable people will fall into these traps. What baffles me is that there are no regulations to protect consumers. Wire transfers are the worst, the name on the wire does not even have to match the receivers account, the only thing that matters is that the account number is valid. Once wired, the money is transferred instantly, and what we have learned since this incident is that scammers move the money out of the receiving account (usually domestic) within minutes to other accounts and convert the funds to crypto currency, within minutes the money is out of the country. Apparently, most scams happen on Friday, so they get all weekend without anyone realizing they have been scammed. Unless the victims realize it within a couple of hours the changes of recovery drop to less than 5%. In case anyone does fall victim, follow these steps immediately –
1. Contact your bank and try to retract the wire
2. Contact the receiver bank and ask them to flag the wire (if they are willing to help)
3. File a FBI wire fraud report on ic3.gov
4. File a report with your local home town police station
It will be a week this Monday since we followed all these steps, and still no word from local police or FBI (any fellow readers in FBI!?). We have been following up every couple of days, but there does not seem to be any urgency, even given a big 6 figure amount. Whats also surprising is that the receiving bank (Citizens) did not want to help in any way, since we did not have a account there. At this point, we believe the chances of any recovery are less than 1%.
I don’t get it either. To set up a bank account to receive a wire transfer, you need to provide a lot of information. Should the receiving bank be just as culpable for allowing a scammer on its platform?!
How much did the scammers get away with so far? And thanks for commenting about this scam initially to raise awareness.
“Wire transfers are the worst, the name on the wire does not even have to match the receivers account, the only thing that matters is that the account number is valid. Once wired, the money is transferred instantly, and what we have learned since this incident is that scammers move the money out of the receiving account (usually domestic) within minutes to other accounts and convert the funds to crypto currency, within minutes the money is out of the country.”
I fell for one of those too good to be true scams as well. The first warning sign should have been it being well below what the market was for the item (it was an electric surfboard).
It was an ad that popped up while I was playing the words with friends app and I foolish thought it would be legit. These boards typically are over $800 but I believe they were have a special and could get it for $100. At that price I actually ordered 2. The website said super fast shipping (I even paid $8 for vip shipping on top of that) from California.
Got confirmation etc but hardly any communication after that. Suspicion was raised when I tried to contact them with hardly any response. I had paid via PayPal and saw that the email had Chinese symbols for name. After 6 wks and not receiving product I did a PayPal dispute. All of a sudden seller starts communicating with me saying covid caused issues and provided tracking numbers and said product already shipped so couldn’t give refund.
Problem was the tracking number was invalid. More communications and same process repeated this time saying it was a different carrier (from DHL to fed ex). Again tracking number did not work. After 2 months PayPal finally did refund me. But it took a lot of emails and sending pics etc.
Did you never get the product?
The product delay is a strategy i now realize to be used to get outside many of the refund windows.
I ordered a custom necklace for my wife with the names of our kids on it for Mother’s Day, 4 weeks before Mother’s Day. It finally arrived 2 months after Mother’s Day. But at least it arrived!
The thing is, we’re all spending more money online now, so e-commerce is booming. Scammers know it’s a numbers game. I guess if you are scamming from outside of the U.S., it’s harder to get caught.
Never did receive the product (I believe it is now over 3 months since I had ordered it). I definitely paid attention to the window PayPal had to initiate a dispute and made sure I started the process a couple of weeks in advance.
I think it is much harder to get a refund through PayPal than it is purchased with a credit card (I am not sure if PayPal sends the money out to scammer immediately or if it is like a credit card and sends it later)
It does seem like a credit card may be easier to refute a claim. But PP does have a refute button and process too that seems to work.
I have seen so many similar ads on Facebook. I remember seeing a small inflatable catamaran that you use with your bicycle for less than $100; might even have been $19.99. I googled the catamaran for reviews and found that it sold for well over a $1000 in Italy. Needless to say I did not order one, but while Facebook is constantly blocking users and or their comments/postings they appear to not police their advertisers.