Avoiding Fraud

Staying alert is the best defense against fraud.

The best way to prevent fraud is to stay informed, aware, and on top of your finances. But it's often difficult to recognize when you've gotten involved in a fraudulent situation. Even worse, getting out of the resulting mess can be quite difficult due to the false, missing, or misleading paper trails that fraud often leaves in its wake.


Complaints of online fraud have been on the rise for several years. But you can escape the fraud trap by having a clear understanding of what you're being offered, who is offering it to you, and what you are agreeing to. Hard sells that demand instant action or payment, and that don't offer options for getting out of a commitment, should be treated with caution.

One way to ensure your safety is to read through any online pitches very carefully. If something seems too good to be true, it may very well be.


How do you avoid illegal telemarketing schemes? First, try to deal only with companies you're familiar with or have done business with in the past. If you get a call from a company you don't know, ask them to send you their company and product information in the mail. Before you agree to buy anything over the phone, it's a good idea to have the offer in writing.

Experts also advise not to give out the following information over the phone to anyone except companies you trust, and only for necessary transactions:

  • Bank account information
  • Credit card numbers
  • Social Security number


Most financial advisers want to help you achieve your goals and are willing to answer any questions you have about their advice. But some advisers may be impatient, pressuring, or misleading.

It's possible that some dishonest advisers can work against you by:

  • Trading to increase their commissions
  • Making impossible promises
  • Giving you misleading information
  • Processing unauthorized transactions
  • Not executing transactions you request

The best defense is to keep close tabs on your accounts to be sure you've authorized every transaction. If you have a complaint, put it in writing, make a copy for yourself, and send copies to your adviser and your adviser's supervisor. You can also contact the Securities Commission in your state.


If you have to give out your name, credit card number, or Social Security number (or you've had them stolen), others can use that information to assume your identity, spend your money, or make you liable for debts or charges.

With credit cards in particular, your cash liability is limited and relatively easy to resolve. But your creditors may assume you are at fault for unpaid bills until you can prove otherwise. To prevent that, keep the following tips in mind:

  • Be cautious about sharing your personal information with others
  • Choose unique PINs
  • Don't ever put your PINs in writing
  • Review your credit card bills to be sure you authorized all of the charges
  • Keep a list of the relevant numbers in a secure place, along with ways to invalidate missing cards, passwords, and other important information
  • Shred your receipts before you throw them away