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Safety and Security

Fraud vs. Scams: What You Need to Know

What is fraud, what are scams, and how are they different? We’ll explore the details of both – and what you should do when you’re a victim of either.

Tim Moore • October 28, 2022

In This Article

  1. Fraud definition
  2. Scam definition
  3. Fraud vs. scam: Will I get my money back?
  4. What to do if you're the victim of fraud or a scam
  5. FAQs
  6. Protect yourself against fraud and scams

As digital banking becomes more popular, instances of fraud and scams are on the rise. 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.

Fraud definition

Fraud refers to any suspicious activity to your bank accounts that you did not authorize.¹ 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, 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.

Scam definition

So what’s the meaning of “scam”? The key difference is that, in instances of scams, scammers convince you to authorize a transaction or willingly hand over personal information.1 While scams were around before mobile banking and the internet, the digital era has given rise to new forms of scams.

Here are a few common examples of scams:

  • Phone scams: 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.
  • Romance scams: Scammers may fake an online relationship with you, then use your trust to convince you to send them money.

Scammers have more than these tricks up their sleeves. Check out our guide to the most common scams and how to spot them for a more comprehensive list.

The takeaway: Scams occur when you authorize a transaction or willingly hand over personal information.

Fraud vs. scam: Will I get my money back?

To recap, the main difference between fraud and scams is that fraud represents unauthorized activity, while scams typically convince you to authorize a financial transaction or willingly supply private information.

You can more likely get your money back as a victim of fraud because fraud is unauthorized. File reports with your financial institution (or the institution where a fraudster opened an account in your name), the Federal Trade Commission (FTC), your local police department, and the three major credit bureaus.

With official reports documenting the fraud, you can typically 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.

Worried about digital banking scams?

We've assembled six tips to avoid scams and fraud when using mobile payment apps.

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 going to be stressful, but staying calm is helpful – and then make the necessary phone calls. The FTC recommends that you:

    1. 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.
    2. 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.
    3. Review your credit report. Look for signs of any other suspicious activity you might not yet know about.
    4. File a report with the FTC. You can do that on the FTC’s website.
    5. File a report with your local police. While the local police cannot likely 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.

It’s also a good idea to work with the credit bureaus to correct your credit report and add an extended fraud alert or even a credit freeze.

You can also work on removing bogus charges from your accounts if you were the victim of fraud. If you fell for a scam, you may not have any luck trying to get your money back.

Scammers are trying new tactics every day. Ensure you and your loved ones know how to protect yourself from online scammers.

FAQs

Is fraud a federal crime?

Fraud can be a federal or state crime – or sometimes both.² 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.³ Fraud, however, carries harsher sentences. The Consumer Finance Protection Bureau encourages victims of scams to 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 any type of fraud, especially fraud involving identity theft, report the fraudulent activity to your bank, the FTC, the local police, and the major credit bureaus.

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.

Not sure where to start? Find out what you need to protect yourself against fraud and scams with our Safety & Security content.

 

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1 Information from HSBC UK’s “What's the difference between fraud and a scam?” as of October 20, 2022: https://www.hsbc.co.uk/help/security-centre/fraud-guide/difference-between-fraud-and-scams/

2 Information from Nolo’s “Fraud: Laws and Penalties” as of October 20, 2022: https://www.criminaldefenselawyer.com/crime-penalties/federal/Fraud.htm

3 Information from HG’s “Criminal Scams - Prosecution Rather than Civil Liability” as of October 20, 2022:
https://www.hg.org/legal-articles/criminal-scams-prosecution-rather-than-civil-liability-52363

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