We’d all like to think we’d never fall prey to a get rich quick scam. That we’d be smart enough to spot someone trying to cheat us out of our hard earned money. But fraudsters are sophisticated. They’re good at what they do. Arming yourself with knowledge of their schemes is the best way to protect yourself. Here are 11 get rich quick scams that promise you money or something you want while robbing you blind.
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1. Credit Repair Scams
Credit repair scams prey on those seeking help to improve their credit scores or history. Scammers lure victims with quick and guaranteed results but steal their money and personal information. Beware of scammers who demand payment before starting credit repair work.
Credit repair companies cannot charge upfront fees by law. Don’t trust promises of guaranteed credit score increases or removal of accurate negative information from your credit report. Credit repair companies cannot guarantee results as success depends on different factors and personal situations.
2. MLMs
MLM, or multi-level marketing, is a business model with a sketchy reputation. MLMs are shady, and some have been known to operate as pyramid schemes, which is a big no-no in most places.
An MLM suggests members will rake in cash by selling products, but it is really more about bringing fresh faces to the team to pad the pockets of the people at the top. Less than 1% ever makes money.
3. Payday Loans
These are high-interest, short-term loans marketed as a quick fix for those in need between paychecks. But unfortunately, payday loans have astronomical interest rates, sometimes 300% to 600% annually or even higher.
High-interest rates can trap borrowers in a vicious cycle of debt, where they find it difficult to repay the loan and accumulate more interest charges. In addition, the tight deadline can make it tough for people to gather funds, resulting in more borrowing or extensions, ultimately raising the total cost.
4. Store Credit Cards
Individual retailers or chains issue them. These cards reward customers with benefits and incentives for shopping at respective stores. But often come with higher interest rates than their traditional counterparts.
Carrying a balance on your credit card can quickly snowball into debt and financial stress due to accumulating interest charges. Store credit cards are only good for the store that issued them or a few related stores. This makes them less valuable than regular credit cards.
5. High-Interest Auto Loans
The entire cost of financing a car increases dramatically when the interest rate is high. This might strain a borrower’s budget and make it harder to repay the loan if interest payments increase over the loan’s term.
Monthly payments for high-interest auto loans can be prohibitive for those with limited financial resources. This can increase the likelihood of late payments, repossession threats, and adverse effects on credit scores.
6. Paycheck Advance Apps
With the help of early salary access applications, you can collect a portion of your paycheck a few days before it is officially due.
However, if you use them too frequently, it’s possible to fall into a cycle of reliance on payday advance apps resulting in a debt spiral and, over time, financial instability.
7. High-Interest Credit Cards
High-interest credit cards are no saints either, as they still take advantage of low-income Americans, albeit not as ruthlessly as payday loans.
Unfortunately, individuals with low credit scores or income are often limited to these credit cards. Credit card interest rates can be as high as 30%, and if left unpaid, the debt can quickly snowball.
8. Rent-to-Own Scams
Be wary of rent-to-own scammers who may overprice a property to trick you into paying a premium for subpar accommodations. There are also those who list prices well below market value.
The second group consists of individuals seeking Social Security numbers for fraudulent purposes.
9. Prize or Sweepstakes Scam
Fraudsters lure victims with the promise of a valuable prize or lottery win, only to demand payment for non-existent taxes, fees, or shipping.
Sweepstakes scammers are sneaky, anonymous operators who vanish into thin air to avoid getting caught. Real sweepstakes never ask for payment of “insurance,” “taxes,” or “shipping and handling fees” to claim your prize.
10. Work-from-Home Scams
These scams typically promise simple tasks or lucrative business opportunities in exchange for an initial payment or investment, but they rarely live up to their promises. Instead, the purpose of these phony job postings may be identity theft or financial gain.
These job offers may seem too good to be true since they arrive out of the blue or too easily. “Start your online business” and “reshipping/reselling” scams are common examples of these types of “work from home” schemes.
11. High Yield Investment Scams
Everyone wants an investment that promises a huge potential return with little risk. When you hear something like that, or an investment that ‘guarantees’ any amount and it’s tied to the stock market or something private, run the other way.
While the stock market yields a historical return over time, nothing is guaranteed. Depending on what you invest in, you’re just as likely to lose money as you are to make it.
Stick to tried and true investments available through reputable financial firms or known online brokerages.
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I’m John Schmoll, a former stockbroker, MBA-grad, published finance writer, and founder of Frugal Rules.
As a veteran of the financial services industry, I’ve worked as a mutual fund administrator, banker, and stockbroker and was Series 7 and 63-licensed, but I left all that behind in 2012 to help people learn how to manage their money.
My goal is to help you gain the knowledge you need to become financially independent with personally-tested financial tools and money-saving solutions.
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