The Top 11 Online Scams And How To Avoid Them!

Scams 101, the top 11 online debt elimination program and credit repair scams also legally get out of debt, raise fico score quickly, grants for personal debt and debt wise. Learn how to avoid them! The Internet allows individuals or companies to communicate with a large audience without spending a lot of time, effort or money.

Anyone can reach tens of thousands of people by building an Internet web site, posting a message on an online bulletin board, entering a discussion in a live chat room, or sending mass e-mails.

It's easy for fraud artist to make their messages look real and credible. People who are most anxious for credit are those most vulnerable.

Many Scams Online Cater to Our Fear and Greed including:

  • debt scams
  • reverse mortgage scams
  • debt settlement scams
  • debt consolidation scams
  • debt reduction
  • debt elimination scams
  • credit scams
  • debt negotiation
  • credit counseling scams
  • reverse mortgage fraud
  • debt fraud

Most are clearly illegal. Others stack the deck so heavily against the borrower that while legal, they are simply unconscionable. Most prey upon ignorance and desperation. Some of the largest corporations in America are nothing more than sophisticated pool hall loan sharks who routinely fleece their clients.

Because credit is big business, all the pressure that Madison Avenue and modern technology can bring to bear is used to convince you to sign on the dotted line.

1) Prepaid interest scams

The fine print may also include an add-on-interest clause. Such interest is added to the total amount of your loan before the lender calculates your monthly payments. The total amount of the loan is then divided by the number of required payments.

There is no advantage to discharging the loan early, because the fine print says interest will not be refunded, so you would not save if you pay early. For example, if you borrow $5,000 and the interest for the term of the loan is $500, your total loan is $5,500, whether you pay in 20 months or two months.

2) Telephone credit scams

Here 900 or 976 numbers are leased from the phone companies by other companies that want to sell you a product or service by phone. But call these numbers and you pay an additional charge above the normal call costs. These charges can top 20 dollars per minute!

Because credit is the item most commonly advertised by companies who use these 900 or 976 phone numbers, they may invite you to call their 900 or 976 number to obtain a secured bank card or catalog card. But all you then receive for your money is a application plus a very large phone bill.

Credit rackets flourish because they cater to the two basic elements to every Fear and Greed.

3) Catalog credit card scam

Issued by mail order catalog companies, these cards allow to purchase from their company’s catalog. Often called gold or you platinum cards, they sound like bank cards, but are not. You will be offered a high credit line without any check. And if this offer sounds too good to be true, it is. Why?

The merchandise in these fancy catalog's is overpriced by 50 percent or more, so you vastly overpay. You must make a large down payment (between 40-85 percent of the price) to cover the seller’s product cost. The company thus loses nothing by offering extensive credit even with no checks because later payments become pure profit to the seller.

Other offers inevitably accompany the cards: expensive application, memberships, or order processing fees. And while these companies claim there are no interest charges, the interest is hidden within the inflated price. These catalog companies seldom report to credit bureaus, so despite their claims, with these type of scams you cannot rebuild credit by dealing with them. They are simply a very easy way to obtain expensive products!

4) Advance fee loan scams

While illegal in many states, hundreds of thousands of people are still victimized each year. In its simplest form, someone promises to find you a loan in exchange for an advance fee. This person may call himself a loan broker, however, after you pay this advance fee, the broker disappears with your money.

Legitimate loan brokers usually collect their fee after they obtain your loan, with their fee paid from the loan. An advance-fee loan broker, in contrast, collects before the loan is found.

There are many sophisticated techniques used to get you sucked into this ripoff. You might answer an ad from a professional sounding firm urging you to call a 976 number for more information, or to receive an application. The price of the call could be the fee or you may be asked to pay the fee by card, check or money order. These advance-brokers frequently advertise via cable television, radio, newspaper, fliers and handouts.

It is virtually impossible to recover your money if the broker fails to deliver. Be suspicious of anyone who asks you to pay for services before delivery.

Before you hand your money over to such a broker, contact the Better Business Bureau, your state Consumer Protection Agency and the Federal Trade Commission.

5) We waived your minimum monthly payment

This is one of the credit card companies most pernicious ripoffs and is ever popular at times of increased spending, such as Christmas. Even though no minimum payment is required that month, you will continue to accrue interest. If your debt is already high, and you accept this offer several times a year, (sometimes you will receive this offer for six consecutive months) you will seriously increase your debt and make the bankcard company considerably wealthier.

A minimum payment plan (an average of 18 percent interest with a 2.5 percent minimum payment) will have you pay $4,230.83 on a $2,000 debt over the 12 years and 9 months it will take you to pay it down. Imagine how much longer it will take, and how much more it will cost if every one of those 12 years includes months in which you omit the minimum payment.

A popular variation is when you walk into a store in August to buy a big ticket item and the salesperson explains that if you buy the item today, you need not make payments until January. What the salesperson doesn’t mention is that January’s bill will include finance charges from August.

6) Credit card cash advances and cash advance check scam

Here’s how it works:

You try to cash a check at a branch of the bank where you have your account. The teller refuses because it is against bank policy to cash checks from its other branches, so he suggests that the bank instead give you a cash advance on your bank card. But of course, you may pay a huge advance fee to the bank for issuing the card, and also pay high interest from the minute you receive the money because banks often eliminate the interest-free period with cash advances.

If the bank eliminates the interest free period because of the cash advance, it can do so for the entire balance of your bill. You could therefore pay as much as 285 percent, even though you fully paid the entire cash advance within 30 days. Some banks will charge you additional interest on any unpaid balance in your card account.

This ploy is known as pyramiding.

Cash advance checks work exactly the same as credit card advances. The charges still appear on your monthly bills and are subject to the same unconscionable rates.

7) Mail order loan scams

Some bank will eventually send you a non-negotiable check. Simply fill out the short application and the bank will send you a real check for the stated amount. Beware. This is only another cash-advance mail order ripoff. The bank will tempt you with very low minimum monthly payments, but the annual interest is likely to be the highest possible legal rate.

For instance, a $3,000 loan at 1.8 percent interest per month and paid in monthly installments of 2 percent will take 77 years and 3 months to fully pay. And you will have paid $24,734.58 in finance charges. Why else would the bank offer to lend you more money?

If you want insurance, see an insurance broker who is independent of any bankcard.

Ask yourself: how often in your lifetime are you likely to lose all of your credit cards?

8) Overdraft protection

This so-called protection can easily destroy you financially and is a variation of the cash advance scam. Here’s how it works: If you write a check that exceeds your account balance, the bank honors the check and charges the difference to your credit card account. The bank will point out that since you avoided bouncing a check you avoided a bounced check fee.

But here’s what you will pay: Because protection is usually rounded to the nearest 100 dollars, if you exceed the balance in your checking account by even 5 cents, the bank advances you the full 100 dollars. You are now also liable for all the other costs associated with cash advances. The bank will apply the extra $99.95 it forced you to borrow and reduce your card account, while the bank collects interest on your loan.

Madison Avenue has given cash advance checks fancy names, but they are still only another way of using your credit card.

9) Insurance from your credit card issuer scam

Insurance offered by a credit card issuer is usually unnecessary and always overpriced! The terms are the worst to be found anywhere, whether it be life insurance, disability, unemployment, hospital insurance or any other type of coverage.

Taking advantage of a company’s offer to waive a monthly payment may free you from that month’s payment, but you don't save money you simply increase your debt.

Be particularly skeptical about credit insurance. Banks love to sell this overpriced insurance because the banks are the beneficiaries as the payment is used to pay your outstanding balance if you die, while they collect hefty premiums in the interim.

10) Credit card registration service scams

These companies offer you protection from loss of your cards with just one phone call. If you pay 15 dollars a year for this protection, it will ultimately cost you hundreds of dollars to have avoided a few toll-free phone calls. And each time you add or subtract a card from your list you must still notify the registration service by mail and store that correspondence. It is far easier and cheaper to keep your own records and notify the card companies yourself.

11) Non-interest bearing deposit scams

These deposits do draw interest but not for you! Insist that if the terms of the contract are not satisfied by a certain date, any monies deposited by you will begin to earn interest at prevailing money market rates.

Things to keep in mind:

There are, of course, many other credit scams. And new ones are conceived daily. But how do you avoid them?

  1. be patient
  2. be suspicious
  3. read the fine print
  4. do not sign anything that you do not understand
  5. check references
  6. practice good credit management
Avoid quick-fixes. If it sounds too good to be true, it probably is.

What should you do if you are scammed?

First, contact the Federal Trade Commission, Better Business Bureau, state’s attorney general or the Department of Consumer Affairs to see if complaints have been filed, or legal action taken against the company. Second, meet personally with a representative of the company.

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