6 Common Types of Financial Fraud To Watch For

Financial fraud sounds vague, but it’s likely something you’ve encountered in everyday life through scams, stolen information or unauthorized activity on one of your credit cards. These, and any other deceptive act intended to steal your money or financial information, fall under the umbrella of financial fraud. 

With scams getting more sophisticated by the day, it’s important to be aware of the most common types of financial fraud out there. We’ll walk through the main types of fraud and scams below so you know how to spot red flags.

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Key Takeaways

• Financial fraud is any deceptive act meant to steal your money or financial information: It happens online, over the phone and sometimes in person.

• Six types are the most common: Identity theft, credit and debit card fraud, check fraud, imposter scams, elder financial exploitation and investment fraud.

• Urgency and secrecy are the biggest red flags: Scammers pressure you to act fast and stay quiet so you don't stop to verify.

• Unusual payment requests signal a scam: Gift cards, crypto or wire transfers are favored because they're hard to trace or reverse.

• Banks never ask for sensitive details out of the blue: No legitimate institution requests your full SSN, PIN, password or one-time passcode in an unsolicited message.

• Act fast if targeted: Cut contact, alert your bank, update passwords and consider a free fraud alert or credit freeze.

Summary generated by AI, verified by MoneyLion editors

What Is Financial Fraud? 

Financial fraud refers to activities intended to steal your money or access your financial accounts, often by obtaining your personal information or identity details. This fraud often happens online, but it can also occur person-to-person. Across the board, though, it involves manipulating you to hand over money or financial information under false pretenses.

The Most Common Types of Financial Fraud at a Glance 

Here are some of the most common financial fraud examples consumers are likely to encounter:

• Identity theft

• Credit and debit card fraud

• Check fraud

• Imposter and scam-based fraud

• Elder financial exploitation

• Investment fraud

Learn More: Fraud Prevention Tips

Identity Theft 

Identity theft and financial fraud go hand in hand. Identity theft is when someone steals your personal identity, often your Social Security number (SSN), to access your funds or open accounts in your name. Identity theft can also occur when an unauthorized person gets access to your Medicare number, account login credentials, bank details or credit card number. It’s different from an account takeover, where someone gains control of an account you already have rather than opening a new one in your name.

If someone steals your identity, you might see unauthorized transactions on your accounts or new accounts opened in your name. An identity thief could even use your SSN to file a fraudulent tax return in your name. 

Credit and Debit Card Fraud 

Credit and debit card fraud happens when someone gains access to your account details and makes unauthorized purchases using your card. With debit cards, fraud can also involve making unauthorized cash withdrawals.

This type of fraud can involve either physical card theft or “card not present” fraud, where someone uses your credit or debit card information to make a purchase online or over the phone without presenting the card or providing valid ID to match.

Learn More: What To Do if Someone Opens a Credit Card in Your Name

Check Fraud 

Check fraud is when someone uses your checks to make unauthorized payments or purchases in your name. Scammers can steal, forge or print counterfeit checks to make transactions you didn’t approve, often by intercepting checks you send in the mail. They can also steal a real check and alter the payee's name so that a check originally intended for you now appears to be payable to them.  

Imposter and Scam-Based Fraud 

This is one of the most effective forms of financial fraud because it relies on people trusting the familiar names of friends, loved ones or people in positions of authority. Imposter and scam-based fraud often involves someone pretending to be someone you know and trust to get you to send them money.  Imposter fraud can also take the forms of tax scams, job scams, romance scams, fake charity appeals or advance fee scams. All of these forms of fraud capitalize on individuals’ emotions, which is what makes them so hard to resist.

Scammers might also pretend to be from a bank or from the government and ask you to hand over financial details. If you get a text that’s allegedly from your bank and asks you to share details like your SSN via text, you should be immediately suspicious.

Elder Financial Exploitation 

Older adults can be especially susceptible to financial fraud, since scammers often target those they assume to have the most assets. Seniors are also often targets because they may live alone and have greater trust in impostors posing as authority figures online or over the phone. 

It’s important to note that elder financial abuse can be committed both by strangers, like a scammer calling and pretending to be from the IRS, and by trusted figures such as relatives or caregivers. In the latter case, a loved one could divert funds to their account because they have a senior’s trust to help manage their finances.

Investment Fraud 

Investment fraud is another type of scam that can take many forms, from soliciting money for fake investments to running a Ponzi scheme that promises huge profits but instead pays investors using other investors’ money. 

One key red flag that should tip you off to investment fraud is an unsolicited offer to invest in a fund that promises returns that seem too good to be true. “Get rich quick” schemes often create a sense of urgency, too, making you feel like you’ll be missing out if you don’t act immediately. Another possible tipoff: Requesting payment through an unusual method, such as via cryptocurrency.

Learn More: Personal Loan Scams

Red Flags That Show Up Across Many Fraud Types 

The most common types of financial fraud share certain warning signs. One of them is urgency; whether a scammer is pretending to be a bank representative and pressuring you to share sensitive information over the phone or someone is telling you that you need to invest in their miracle fund now or regret it forever, this is a major red flag. 

Scammers hope you’ll act quickly without thinking, whereas reputable financial institutions and investment opportunities will be able to accommodate your requests for more information and identity verification on their part. Secrecy — encouraging you to move quickly without telling anyone — is another warning sign in this vein.

If you encounter a request to pay through an unusual method, such as via gift card, crypto or a wire transfer, you should be suspicious as well. Scammers often favor these options since it’s harder to trace them or reverse the payment.

Poor spelling and inconsistent contact details are also red flags. If you receive an email that appears to be from your bank but the sender address includes random numbers or a misspelled word, that’s a clear sign you’re dealing with a scammer.

Pressure to share your personal information or financial account details should always give you pause. Banks will never ask for your full SSN, password, PIN or one-time passcode in an unsolicited call, text or email. 

If anything seems too good to be true, or if the outreach doesn’t square with how a bank or individual usually communicates with you, that’s a good sign that extra caution is warranted. 

What To Do if You Suspect Financial Fraud 

If something seems fishy and you think it might be financial fraud, a few steps can help protect you and alert the proper authorities.

First, stop contact with the suspected scammer immediately. Whether they’ve reached out via email, text or phone, stop responding. From there, contact your bank or credit card issuer to let them know you suspect fraud has taken place. In many cases, your bank or issuer detects fraudulent charges as they happen, so you may even receive a fraud alert before you notice the charge yourself. If you see one fraudulent charge on your account, check your transactions across all accounts to see if there are any others.

Once you’ve done immediate damage control, update your passwords for any account that appears to be compromised. You should also check your credit report to see if any new unauthorized accounts appear under your name. If you think your personal information was exposed, it could also be worth placing a fraud alert or credit freeze with the credit bureaus. 

A fraud alert requires extra steps to confirm your identity before opening a new account, and a credit freeze blocks access to your credit report so fraudsters aren’t able to open a new account in your name. Both are free. You only need to contact one bureau to place a fraud alert, but a freeze has to be placed with each of the three.

Beyond reporting an incident of fraud to your financial institution, you can file a complaint with the Federal Trade Commission. Make sure to save all evidence related to the fraud as proof, including any messages or documents sent by the scammer.

Bottom Line 

The most common types of financial fraud take different forms, and they’re unfortunately incredibly common online, over the phone and even sometimes in person. While most of us will come across a scam, knowing the red flags to watch for can mean the difference between fighting unauthorized charges and stopping a thief before the damage is done. 

Remember that a bank will never ask you for sensitive identity information out of the blue, and messages that urge you to act quickly and keep a too-good-to-be-true opportunity secret are usually just that: too good to be true. 

FAQs About Types of Financial Fraud 

What is financial fraud? 

Financial fraud is any illegal activity used to gain unauthorized access to your money, either by getting your account information or identity details. Common examples include credit card fraud and imposter scams.

What are the most common types of financial fraud? 

Some of the most common types of financial fraud include identity theft, imposter fraud, credit and debit card fraud, investment fraud and elder financial exploitation.

What is the difference between identity theft and financial fraud? 

The difference between identity theft and financial fraud is that identity theft is a type of financial fraud that involves using your identity to gain access to your financial accounts, whereas financial fraud can take other forms, such as directly accessing your credit cards or other accounts.

Which financial fraud types often start with impersonation? 

Some financial fraud types that often start with impersonation include bank and government agency scams, romance scams and tech support scams. Scammers often pretend to be affiliated with a reputable organization, but they may call from an unauthorized phone number or use an email address that doesn’t match the legitimate organization.

What should I do first if I think I’m being targeted? 

If you think you’re being targeted by a financial scammer, the first thing you should do is cease contact. From there, reach out to your bank or credit card issuer to let them know, and to alert them to any unauthorized transactions or activity. 

Key Terms

• Financial fraud: Any illegal act meant to steal your money or access your financial accounts.

• Identity theft: Stealing your personal details, like your SSN, to open accounts or access funds in your name.

• Account takeover: Gaining control of an account you already have, rather than opening a new one.

• Card-not-present fraud: Using your card details for online or phone purchases without the physical card.

• Imposter scam: Fraud where someone poses as a trusted person or authority to get your money.

• Elder financial exploitation: Fraud targeting older adults, by strangers or trusted figures.

• Investment fraud: Schemes like Ponzi setups that promise unrealistic returns.

• Fraud alert: A free flag requiring extra identity verification before new credit opens in your name.

Sources

• FTC: ReportFraud.ftc.gov 

• FTC: What To Know About Identity Theft 

• CFPB: Fraud alerts and credit freezes

• FTC: Investment scams 

Summary generated by AI, verified by MoneyLion editors

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