As we more regularly use technology in our day-to-day lives, fraud and scams are on the rise.¹ Knowing how to recognize fraud and scams as they happen can keep you from losing money and damaging your credit score.
But what’s the difference between fraud and scams, and can you get your money back if you fall for either? Below, we’ll cover how these terms differ, what each means for your chances of getting your money back, and what to do if you’re the victim of fraud or a scam.
What is fraud?
Fraud refers to any suspicious financial activity that you did not authorize.² This might include someone using your debit or credit card number to make unauthorized purchases, logging into your account and locking you out, or full-on identity theft.
In the case of identity theft, a fraudster might use your identity to:
- Open new bank accounts or credit cards in your name
- Receive medical care using your health insurance
- Claim your tax refund before you file
You must act quickly if you suspect you’re the victim of fraud. Children and seniors are often targets of identity theft; if you have children or take care of an older parent or family member, monitor their accounts for suspicious activity. If your identity was stolen, visit identitytheft.gov for immediate assistance.
The takeaway: fraud occurs when you did not authorize the activity.
What are scams?
Scams happen when you authorize a transaction or willingly hand over personal information after being misled by a scammer.² While scams existed before mobile banking and the internet, the digital era has given rise to online scams.¹
Some common scams include:
- Romance scams
- Holiday scams
- Lottery and sweepstakes scams
Read on for more details on how scams like these work.
The takeaway: Scams occur when you authorize a transaction or willingly hand over personal information.
Fraud vs. scams: key differences
The main difference between fraud and scams is that fraud is an unauthorized activity, while scams typically convince you to authorize a financial transaction or share your sensitive account or personal information.
You are more likely to get your money back as a victim of fraud because fraud is unauthorized. If you’ve been a victim of fraud, you can report it. Read on below to learn how to report a fraud or scam.
Official reports documenting the fraud can help you recover your money and prevent damage to your credit report.
While you should still report scams to the FTC and your local police department, you may be less likely to get your money back since you willingly gave away your information. That’s why it’s important to stay vigilant about new scams and think twice before giving a stranger your money or personal information.
Common examples of fraud
Below are some popular examples of fraud that you could encounter:
- Identity theft: Identity theft happens when someone steals your Social Security number, credit card account number, or other unique personal information and uses it to open a new credit account or buy things.
- Tax fraud: Someone could also steal your identity and use the information to file a fraudulent tax return.
- Debt collection fraud: A person pretends to be a legitimate debt collector to scare you into giving them money.³
Common examples of scams
Some common types of scams include:
- Phone scams: Phone scams like SMS phishing happen when a person (or robot) calls or texts you and convinces you to send them money or share personal information like your Social Security number. They may pretend to be a debt collector or government employee and threaten legal action against you if you don’t comply.
- Phishing: Phishing is a type of digital attack involving cyber criminals attempting to get you to hand over personal information by sending fraudulent emails, text messages, or phone calls.⁴
- Lottery scams: A person calls or emails you to inform you that you’ve won a prize – but requires you to make an upfront payment to cover fees and taxes. On that note, here’s how you can tell if you’ve actually won a Chime sweeps.
- Romance scams: Romance scammers may fake an online relationship with you and then use your trust to convince you to send them money.
- Charity scams: Charity scammers may ask you to donate money to help victims of a tragedy recover or a specific group of people like firefighters. A common charity scam warning sign is that the scammer doesn’t provide any details about the charity.⁵
- Holiday scams: During the holiday season, scammers may try to steal your money by not delivering something you purchase, stealing gift card information, or using other methods. You can minimize your chances of becoming a victim of a holiday scam by reading reviews from review websites like Trustpilot or the Better Business Bureau to ensure an organization is legitimate.
Scammers have more tricks up their sleeves. For other examples, check out our guide to the most common scams and how to spot them.
What to do if you're the victim of fraud or a scam
If you’re the victim of fraud or a scam, act fast. Take a breath – it’s stressful, but staying calm helps – and then make the necessary phone calls. The FTC recommends that you do the following right away:⁶
- Report the fraud or scam to the financial institution(s) involved. If a fraudster opened a new account in your name, make sure it’s closed.
- Place a fraud alert. You can do this with any of the three major credit bureaus – Equifax, Experian, and TransUnion. The bureau you contact will coordinate with the other two.
- File a report with the FTC. You can do that on the FTC’s website.
- File a report with your local police. While the local police likely can’t do much, having an official police report may help your case when trying to get your money back and remove bad marks from your credit report.
The FTC then recommends you follow up with these steps:
- Close new accounts opened in your name and remove false charges from your accounts.
- Review your credit report. Look for signs of any other suspicious activity you might not yet know about.
- Consider adding an extended fraud alert or even a credit freeze on your accounts.
If you fell for a scam, you may not have luck getting your money back.
Protect yourself against fraud and scams
If you’re the victim of fraud or scams, act quickly – you may be able to stop the perpetrator before they can do major damage. But more important than knowing how to react to fraud and scams is knowing how to prevent them from happening in the first place.
If you’re a Chime member or thinking about becoming one, find out how to protect your account against fraud and avoid scams that target Chime members.
FAQs
Is fraud a federal crime?
Fraud can be a federal or state crime – or sometimes both.⁷ Because fraudsters intentionally cheat people out of money and expose their personal information, the government takes this crime very seriously; judges often issue harsh sentences for convicted fraudsters.
Is scamming a crime?
Though scams involve a person willingly authorizing a transaction or handing over personal information, they are often still considered a crime.⁸ Fraud, however, carries harsher sentences. Victims of scams can contact their local police department, state attorney general, and the FTC to take action.
What are the most common types of fraud?
Among the most common types of fraud are debit and credit card fraud, healthcare fraud, bank account takeover fraud, mail fraud, elder fraud, and tax fraud. If you believe you are the victim of fraud, especially fraud involving identity theft, report the fraudulent activity to your bank, the FTC, the local police, and the major credit bureaus.