Some are old, some new, but all are actively being run by cons
By Dana Dratch
Con men love credit cards.
They snatch receipts, peep PIN numbers, dive through dumpsters and share information over the Internet.
Scammers are creative. They'll take an old con and give it a new twist. Some go high-tech, employing texting, cameras or software. Others embrace the old ways, using nothing but a voice and a telephone.
And some of their cons break the hearts of even the most experienced investigators. Disabled people are robbed of benefits. Working families get wiped out, left with nothing but bank balances in the red.
But with a little advance notice -- something most victims don't have -- you can sidestep the con men. Here are nine popular credit card scams, with clues on how you can recognize them before it's too late:
We can lower your rate!
The caller gives you the good news: You can get a lower interest rate on your card.
The basic premise: For an upfront charge, sometimes as much as $500, the caller promises a deal, says Susan Choe, section chief with the Ohio Attorney General's Office. And you can simply put the fee on your card.
They can deliver, they say, because they have the right contacts or a special relationship with the card issuer. They may even claim to be from "card member services," "card services" or "cardholder services," she says.
Consumers who agree are charged the upfront fee, but those making the promises "failed to deliver," she says. The state is putting the word out to consumers: "Please don't pay someone hundreds of dollars for something you can do yourself," says Choe.
In some cases, it's a ruse to collect your financial information. In others, it may be an actual business that's simply charging a huge fee for something you could do yourself, she says.
Signs the call is not what you think: If this is truly a division of the issuer, you won't have to pay a fee to get a lower rate. If this is a legitimate outside company, it can't do anything you can't already do for free, says Choe -- such as call up and ask for a lower rate. And beware if the word "guarantee" gets thrown out, she says. No one can guarantee you a lower rate. Another clue: The first contact may come through a robo-call, which is illegal.
The fake freeze
You get an "emergency" text: There's a problem with your account. Your card has been frozen, and you need to call this number. When you phone, you're prompted to enter your card number and other information. What's really going on: Crooks are collecting information so that they can use the card.
This one was especially heartbreaking when criminals targeted people receiving disability benefits that were loaded onto cards, says Choe. "The accounts were drained."
How to avoid it: Never use phone numbers or contact information that someone gives you in an e-mail, text or phone call. Instead, look up the card contact information yourself (from a monthly statement, on the back of the card, etc.) Then call and find out what's really going on.
The three-digit con
You get a call from your credit card issuing bank. There have been some problems with security, or they've noticed unusual charges. They need to confirm your information.
The real purpose of the call: to get the three-digit security number on the back of the card. "That's what they're really after," says Steven Weisman, law professor at Bentley University and author of "The Truth About Avoiding Scams."
They may even have some of your data already. Which means they've either bought some of your information online, gone dumpster diving or picked up one of your old receipts.
The clue to a con: "When they're asking you for information, that's always a bad sign," says Weisman.
Free games! Free music! Free porn!
You're online and find free music, games or porn.
But that download could come with a keystroke logger. That's a malicious little piece of software that will note your private passwords and other information (such as card numbers), and send it back to the scam artist, says Weisman.
How to protect yourself: Keep your security program updated. "It has to be done automatically and regularly," he says.
Just as in the real world, avoid sketchy cyberlocations. "There's not much of a fear of this with legitimate websites," he says. "Downloading free music or free games is like waving a red flag," says Weisman.
Come to our spoof site!
You get an e-mail from your bank, PayPal or your favorite store. There's a problem with your account. There's been a security breach. Or your order's ready. Whatever it is,
just click this link to get more information or pay for your order.
It's a scam. And so is the site on the other end of that link.
Some of the e-mails look real, says Weisman, who recently received one from a bank. "If I had an account, I might have actually fallen for it," he says.
How to protect yourself: Hit delete. If it's a vendor from a place where you have an account or are expecting an order, go to the real site yourself, not through a link.
Bad credit? No income? No problem!
This credit card premise sounds great: $0 fees, 0 percent APR. and a hefty credit limit. And if you've had some financial problems it doesn't even matter.
Chances are it's one of a couple of scams, says Nadine Samter, an attorney with the Federal Trade Commission. The catch is buried in the fine print, if it's revealed at all, she says.
In one recent case that her office prosecuted, the card was good only for items in the company's catalog, which were marked up well beyond the norm, Samter says. And a "cash advance" feature turned out to be an application for a payday loan, she says.
Even worse: The company deducted hundreds in fees (almost $400 in some cases), directly from consumers' bank accounts, says Samter. Since consumers weren't expecting the bank drafts, many didn't have enough money in their accounts to cover them. So they were also hit with insufficient funds charges from their banks. End result: a pile of debt and a card they never used.
Bad credit? Part 2
In another twist on the "bad credit, no problem" script, the card is actually a secured credit card. Unlike legitimate versions, the fact that it's secured is buried in the promotional fine print or omitted, and these scam versions sport hundreds of dollars in fees -- rendering them nearly maxed out from the beginning.
Consumers encounter these "bad credit" card schemes in myriad ways. The companies may buy lists of the recently bankrupt and call or send an e-mail or snail mail. Or they may place an ad and wait for the phone to ring.
How to protect yourself: The old saw is true, says Samter. "If it looks too good to be true, it probably is." And if your credit or finances are shaky, ask yourself why an issuer would give you a card, she says.
Watch out for high-pressure sales tactics, Samter says. "That usually means it's not legitimate," she says.
In addition, the Credit CARD Act of 2009 limits upfront fees on new cards to 25 percent (or less) of the credit line in the first year. And regulators are moving to include those initial "processing fees" in the 25 percent cap.
You're shopping online. Suddenly, you're presented with a free trial offer for another product or service. Hey, why not?
And "before you know it, they're debiting your bank account every month," Samter says.
Often called "pass-throughs" or "affiliate marketing," these are third-party vendors who are piggybacking on the original transaction. It can be a scam or a real business. But "it's a really bad practice" for consumers, she says.
Depending on the company, the charges could be just a few dollars. But in some cases, it's $50 to $100 a month or more.
In some instances, consumers accepted the offers but didn't realize they had to actively cancel if they didn't want to be charged after the trial period ended. In other cases, regulators suspect that the consumers didn't opt in but the charges were simply billed to their accounts, says Samter.
To protect yourself: Say no to those free trial offers. And read your credit card statements every month. If you find charges you and your family don't recognize, report them to your card company.
You're ready to pop your card into the reader at the ATM or gas pump. But something looks a little "off."
Listen to your intuition, says Gordon Leek, a retired Calgary police detective and the author of "Trust Me: Frauds, Schemes and Scams and How to Avoid Them."
Criminals will install overlays that cover the real machinery, says Leek. "And most consumers don't realize they are putting their cards into these fake overlays."
To prevent problems: Don't be afraid to get physical. "Grab the thing and shake it a bit," he says. While crooks may do a good job cosmetically, the fakes often aren't that durable.
Since crooks also need your PIN numbers. there may be a spotter with a camera, or a camera planted nearby. So be on the lookout for items that don't belong or aren't usually there (such as a trash can), or someone hanging around.
Published: December 1, 2010