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Fraud Online - An Introduction (Part Two of Two)

written by: Lamar Stonecypher•edited by: Brian Nelson•updated: 4/13/2009

This article provides guidelines to help avoid and identify the plague of fraud online.

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    Keeping in mind that fraud is any intent to hide or disguise the legitimate source of an offer to make it look as if it originated from a legitimate source, there are specific precautions the internet user can practice regularly to avoid becoming a victim of online fraud. These are below. In addition, every internet user should ask themselves if they would consider the same offer if it was received in a parking lot or answering a phone call. [Note: Some of the guidance below applies to transactions done in the United States. Readers from other countries should check with their local laws to see what protection they afford. The guidance that is U.S. specific can be generalized providing best practices for computer users in any country.]

    • Try to use one bank account or credit card for all online purchases and subscriptions. Deposit monies as needed.
    • Keep copies of all purchases and transactions.
    • For those in the U.S., try to purchase from companies based in the United States so consumer protection laws apply. If you are already doing business with a company outside the U.S. and are satisfied, there is no reason you should suddenly stop. Just be aware that USA consumer protection laws will not apply for transactions based outside the US.
    • Try to use a credit card instead of an online check or debit card for mail order and online financial transactions where you do not receive the item purchased at the time of payment. Credit card companies are required by American law to remove a questionable charge while they investigate your dispute according to the American Fair Credit Billing Act. You are able to see the charges on your statement before you pay for them. This gives you an opportunity to dispute the charges. If a charge is not yours, Americans can be liable for no more than $50.
    • Although many debit card issuers offer this protection they are not required by law to provide it and they can change their policies at any time. Debit cards are subject to the American Electronic Fund Transfer Act. Debit card issuers are not required to investigate or be a go-between between the consumer and the merchant as with credit cards. If a criminal uses your debit card, it is possible for the entire balance of your account to be removed. The charges are immediately removed from your account just like online checks. There isn’t a grace period to dispute the charges with a debit card.
    • Try not to use a debit card when your card is not in your possession. Try to use debit cards only when it is required that you enter your PIN (Personal Identification Number). This will help avoid skimming (the illegal copying of credit card information). Entering your PIN also avoids the ‘hold’ of monies (removed from your available balance) by businesses, typically in the hospitality and travel industries, so they will be assured your bill is paid. When you use a card reader in a store, you can avoid entering your PIN by asking the cashier to process your debit card as a ‘credit’ or ‘other’ transaction and having you sign the credit slip if the card issuer has a ‘zero liability policy’.
    • Remember that your bank is in business to make money. When you opt-in for overdraft protection with your checking account, it is in the bank’s interest for you to use overdraft protection because they receive fees for this loan of monies to you, their customer. When you make a purchase that is more than the available balance in your checking account and overdraft protection kicks in, your debit card is not denied just because your account doesn’t have enough available monies. Available monies in your account are not necessarily all of your deposits into your account at a particular time because some deposits may take several days to become available for your use. Banks process the largest withdrawals from your account first even though they did not necessarily occur first. This can generate overdraft charges. One way to avoid overdraft charges is to link your checking account to another account. The fees generated typically are not as much as overdraft charges. Check with your bank.
    • Be cautious of the salesperson or solicitor who asks you to keep the deal or offer a secret. Legitimate salespersons or solicitors do not keep their offers a secret. They want as many persons as possible to know about the offer because the more people that know, the more sales or donations can be made.
    • Be cautious of the salesperson or solicitor who insists you do not need to check the company with anyone or you do not need any written correspondence, information or references about the salesperson or company. These are definite indications of fraud because a legitimate representative wants to protect and build their reputation, their client base and the reputation of their company. They also want prospective customers or clients to know about their good past records.
    • Avoid offers for a fast divorce outside your country using the internet.
    • Be very wary of guarantees or promises of extravagant profits, fast returns on your money, fast profits, steady income for little effort, large rewards for little effort, or credit when local lenders reject your application.
    • Be cautious about the offer that is available for only a limited amount of time, you need to “act fast", or the offer contains “insider confidential information". Treat these emails as spam or hang up the phone.
    • Be aware of the new online friend or love interest who asks you to deposit a cashier’s check in your account and then asks you to send them a postal check or wire money to an out-of-country account. Chances are they have given you a fake cashier’s check.
    • Beware of the cost of a product or service when it is much less than the retail price or is not for sale at known reputable stores and websites. Either the product itself is illegal or you have a good chance of surrendering your money and not receiving the item.
    • If you receive a check or coupon code (or offer) in your postal mail, email, or on the telephone for a free or very inexpensive internet access service, read and understand the terms of acceptance very thoroughly. If you cash the check or coupon that may be enclosed with the offer, watch your next phone bill for a change of service provider or strange or unauthorized charges.
    • Be careful when downloading a program to access “free restricted" websites. In the End User License Agreement (which can be quite lengthy and which you must agree to before installing the program or accessing the “free" content at a website) there can be a statement that says the website or software company is not responsible for any long distance telephone charges you may incur by giving your permission for them to have your computer dial their access phone number.
    • Also be cautious of pop-up windows that insist you “Download NOW". Reputable companies sometimes have pop-up advertisements for their immediate download (or trial software) but they will first direct you to a registration webpage or a webpage that explains more about their product. Reputable companies want prospective customers to deliberately and willingly begin the download. Reputable companies do not trick prospective customers into trying their product. Stop the download if you clicked on an advertisement and it is immediately downloading (possibly installing itself) without your consent or knowledge.

    Use anti-virus software and anti-spyware software on a regular basis to recognize and eliminate spyware and Trojans. These uninvited intruders can send the information in your ewallet (if your computer has one) and all your keystrokes (which provide your usernames, passwords, credit card and banking information) to unscrupulous criminals.

An Introduction to Online Fraud

Fraud online is now comonplace. Are you aware of everyday tricks to get you to part with your information or monies? This series highlights the temptations.
  1. Fraud Online - An Introduction (Part One of Two)
  2. Fraud Online - An Introduction (Part Two of Two)
  3. Auction Fraud
  4. Health Fraud Online - An Introduction
  5. Recognize the Fraud in Miracle Cures