Thursday, January 13, 2011

Golden Rules for Scam Prevention

You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.
- Abraham Lincoln (attributed)
Most of us want to trust people so it's not so hard to be fooled by a scammer. Here are The 10 Golden Rules of Scam Prevention from MoneyTalksNews.com.

Rule Number 1: Don't Trust the Testimonials of Stranger
The only testimonial worth believing comes from people you both personally know and totally trust. The testimonials you see from strangers on TV or in online reviews may be lies or paid for. Ignore all testimonials in ads, websites, and infomercials.

Rule Number 2: “Documented proof” is not proof
Anyone willing to rip you off can create fake checks, letters, or anything else to back up their claim. And even if they have valid proof of past success, that is no promise of future success.
- Markets are cyclical so last year's top performing stock may be this year's biggest loser.
- Don't forget that Ponzi schemes and Pyramid Marketing pay off the early contributors to lure in a larger number of fish. 
- Ads often cite the most extreme success stories - not everyone will lose 100 pounds on this diet.

Rule Number 3: Guarantees are only as good as the company behind them
A common scam is that the results are “guaranteed, or your money back!!!” But what if the company refuses to honor the guarantee? Are you prepared to take them to court? Many fraudulent companies use post office boxes so they cannot be located by courts of law. Or they may flee the country or change the company name to hide from lawsuits.

Rule Number 4: It’s not fine to ignore the fine print
Virtually every deal that goes bad is the result of people listening to the sales pitch without reading the fine print in the contract. It is your responsibility to know that your mortgage payment will go up after three years, or that your credit card interest will jump from 9 percent to 29 percent if you miss a payment or that mutual funds are risky. If you don’t understand the fine print, ask a friend to explain it to you.

Rule Number 5: Haste makes waste
The only people who can wisely make snap decisions regarding a purchase are those who are experts at what they’re buying and make such decisions frequently. For everyone else, take your time when buying a house, a car, stocks, getting married, etc. The bigger the cost, the more time you need to examine it. An offer that is "too good" to wait for will usually leave you burned.

Rule Number 6: Use the Internet to Verify Claims
Consider this scam, an ad asks for $400 to help you get a government grant for your small business. If you go to the Internet and type “government grants for small business” into Google or other search engine, you'll quickly find a government website which says that the federal government does not provide grants for starting and expanding a business. So the ad was a rip-off. The Internet can also expose frauds where the information is free online that someone is offering to sell to you.

Rule Number 7: Check Online for Fraud
Use a search engine to search for a company or product and add the words “review” and “ripoff.” You will be directed to sites that specialize in consumer reviews. This is a twist on rule #1 about strangers. Never trust product endorsements from strangers, but if many strangers call a product a fraud you ought to listen carefully. Do they have an axe to grind or is there a real problem?

Rule Number 8: Use the help you’ve already paid for
Your tax dollars fund agencies, like the Federal Trade Commission, that publish advice on how to avoid rip-offs.

Rule Number 9: Getting something free? You might be the product, not the customer.
Most free content is paid for by advertising that is trying to catch your eye or ear. Other sites survive by collecting and selling information about your and your online habits. Consider the motivation of those offering free content and how they are using you.

Rule Number 10: If it sounds too good to be true…
"The best way to avoid getting ripped off is to simply ignore people and companies who promise simple solutions to complex problems. They don’t exist. Nobody is going to show you how to buy a house for $398, nobody is going to provide a consistent 12 percent return without risk, and nobody knows how to make big bucks with little effort at home in their spare time. Think about it: If these claims were true, why would the people making them share that information with you?"

Bottom Line
You don’t have to remember all the above rules to protect yourself from con artists. Just following a few will help. Imagine a product without the money-back guarantee and the testimonials. Would you still buy it?

Update

The Consumerist has this quote by an author on Amazon,
I've purchased my own book, Wealth Hazards, close to 200 times now. I wrote 42 customer reviews and voted on them 108 times. Not once was a review or vote rejected by Amazon. It took about 45 days to move the book up to #1, but after it got there I didn't feel it was appropriate to promote it - so I have not profited from it. I continue to buy 2 or 3 copies a day, write reviews and vote on the reviews and wait for Amazon to notice. They haven't.

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