Asked to Buy a MoneyPak? You’re About to be Ripped Off

The Ripoff Alert is a new series appearing once each week on Fridays. It alerts you to the latest scams and ripoffs trying to get between you and your money, and gives you information you need to stay safe. This is #18 in the series. 

In a new twist to an old scam, criminals are contacting you and claiming you’ve won a flat screen TV, a car or a lottery. They may have access to secret government grants. To claim your prize, you have to go out and buy a prepaid card called Green Dot MoneyPak and load $500 or $1,000 onto it. You buy these cards at Walmart, drug stores or 7-eleven convenience stores.

You’re then instructed to hand over the scratch-off information from the card. They supposedly need proof you’ll be able to pay the shipping costs and taxes on your “winnings”. The second they have your number, they have access to every last cent on your card and will drain it pronto.

In the past criminals could send out fake checks, asking you to deposit them and wire a portion back. But this method has been around so long most people are aware that if they receive a check for too much money they’re being scammed.

Know that anybody asking you to buy a MoneyPak card is trying to rip you off. This is just another case where they’re using a legitimate payment method for illegitimate purposes.

None of this is Green Dot’s fault. They post a warning on the front page of their website:

Use your MoneyPak number only with businesses on our approved list. If anyone else asks for your MoneyPak number or information from your receipt, it’s probably a scam. Don’t give your MoneyPak number to pay for something you buy through the classifieds or to collect a prize or sweepstakes. Do not give away your receipt information to another party either. If you give your MoneyPak number or information about the purchase transaction to a criminal, Green Dot is not responsible to pay you back. Your MoneyPak is not a bank account. The funds are not insured against loss.

I know times are tough. You might be desperate for cash. When someone comes along offering free money, you may think you’ve found your golden ticket. But don’t suspend your good judgement – they are taking advantage of your situation and just trying to rip you off.

Be cautious when anybody contacts you out of the blue claiming you’ve won something. Key rule: If you never entered a drawing you’re not going to win a prize. 

Take Control of Your Finances: Don’t Let Inertia Rule the Day

We tend to think that history repeats itself. I believe that’s because we have no idea how to predict the future. Or maybe we’re lazy. Whatever the reason, we think that because things have happened one way in the past they will continue that way in the future. Psychologists call this inertia bias.

This assumption of continuity might be convenient, but I’ll show you why it’s poison for your wallet.

Financial success relies on knowing when to change and when to stay the course. For example, how do you know whether to stay with your auto insurance company or switch to a new one? How do you know your cable company isn’t ripping you off? Do you still use that land line or is it there out of habit?

Just because you found a great deal today doesn’t mean it’ll still be a deal a year or 5 years from now. Your goal is to save and be more efficient, so you have to put in some effort. You can’t afford to assume things will always stay the same.

Auto Insurance

I’ll admit – it’s a pain to shop around and get several quotes. The internet hasn’t provided an easy way to compare prices between companies, so we’re forced to call each one separately. Calling to get three quotes could easily take an hour. This is well worth your time though, because yearly premiums can vary by $1,000 or more.

Insurance companies differ in how they assess risk and how much of that risk they’re willing to take on. To one company you might be a moderate-risk driver, but to another you could represent a low risk. In addition, companies often raise and lower their premiums based on which area of the country they’re targeting. If they’re trying to rid themselves of customers from your zip code, you may find your premiums increasing quite a bit.

Those who remain with their auto insurance provider year after year are probably paying more than they should for coverage. The same goes with home and renters insurance, so shop around at least every two years.

Cell Phone Providers

I’ve covered how to save on your cell phone bill several times in the past. Most people remain with the same old provider they’ve always used – most likely one of the Big Four (Verizon, AT&T, Sprint and T-mobile). If you’ve been reading the news recently you know that these behemoths are passing through large price increases whenever they think they can get away with it. They’re doing away with unlimited data, which is ironic because that’s where we’re headed with cell phone usage in America.

What does this mean for your wallet? You’re probably paying 50% more for cell phone service than when you signed up a decade ago. You’re also stuck in one of those nasty two-year contracts, where they lock you in and provide inferior customer service. Instead, switch to one of the low-cost, no-contract providers like Straight Talk, Virgin Mobile or Metro PCS. With Straight Talk for example, you’ll get unlimited across the board for $45 a month, no contract.

Here, remaining in an overpriced contract with one of the Big Four will cost you about $500 a year, or more if you have additional lines. Just because it may have made sense before doesn’t mean it does now. There are better options out there.

Buying a Home

Since the start of the crisis people have moved out of houses based on economic necessity and have moved in with parents or other family members. Some have become renters. Housing prices have tumbled the past five years as a result.

Now it looks like housing prices have finally hit bottom, and interest rates hover around 3.5% for a 30-year loan. That’s the lowest rate on record. If buying a home makes sense in your life, this is the time to act. Prices don’t have anywhere to go but up.

If you’re looking at the gloom of the past five years you might assume prices will continue to drop indefinitely. You may be sitting on the sidelines, waiting for the economy to pick up again. When it does you will have missed your chance.

So Much “Normal”

With inertia bias such a large part of our lives, is it any wonder we have so many words in the English language to describe how things are always done? Typically. Usually. Normally. Generally. Ordinarily. Regularly. Characteristically. Did I miss any?

Like bad habits, inertia is tough to break. But your financial health depends on your ability to know when to change and when to stay the course. Shatter those molds and watch the savings add up!

Can you think of a time when inertia caused you to spend more than you should have?

Photo by thestrategyguysite.com

Beware of Investments Offering Oversized Returns

The Ripoff Alert is a new series appearing once each week on Fridays. It alerts you to the latest scams and ripoffs trying to get between you and your money, and gives you information you need to stay safe. This is #17 in the series. 

Trick question: What’s an easy way to guarantee a 10% return on your investments? Well, if I were a smooth criminal trying to make off with your money, I’d tell you I knew of a business that was about to make it to the big leagues. I’d convince you to “invest” your money before that happens. You’ll double or triple your money in just weeks! And with almost no risk!

Many of us are looking for that path to easy wealth. We badly want it to exist, and in some cases are willing to risk everything we’ve worked hard for to make a quick buck.

The truth about investing is that if you want a large return, you’re going to have to accept some level of risk. The larger the return you want, the larger the potential risk you have to take on. Anybody who tells you otherwise is trying to clean out your wallet.

The opposite is also true. If you’re unwilling to accept much risk, you have to settle with a lower return. Don’t be fooled into thinking you can have only upside with little or no potential downside.

“But I Need to Catch Up!”

Unless your time horizon is 10 years or longer, there’s no place you can put your money right now and have it grow more than about 1%. I know it’s pathetic. We all realize that won’t even beat inflation. But one nice side effect of these times we’re in is that if somebody comes along and tells you they can earn you 15% a year guaranteed, or 2% per day, or any other number that seems too good to be true, you know they’re lying. Such rates just don’t exist, today or ever.

I know it’s tempting to take the bait. You lost 30% of your nest egg in the recession and you need to get back on track. But the criminals will make off with your money, leaving you without the 15% return or your original investment.

Think about this: In an era where banks offer 1% per year on savings accounts, how can anybody legitimately offer 2% per day? Not gonna happen.

They’re Just So Sly

Fraudsters use online bulletin boards, newsletters and emails to alert you to these “can’t lose” deals. The internet allows them a curtain of anonymity that emboldens them to make audacious promises. But if this investment were such a great deal, why would they be telling us? Wouldn’t they just invest all of their own money if they truly believed it was a good deal?

You have to be careful with affinity fraud as well. This happens when someone you know and trust, such as a church leader or family member, tries to get money out of you for illegitimate purposes. It’s easy to let our guard down around those we trust. But when someone starts asking for your money you need to start asking questions.

So back to our trick question. The answer is there’s no way to guarantee a return of any percent on investments. By its very nature, investing is about taking on risk. It’s about taking chances. There are no guarantees with investing. 

Simplify Your Life: Do These 5 Things After Buying a Car

Buying a car, whether new or used, should be an exciting experience. Most people buy new wheels every 5 years or so. But for those of us who keep cars a decade or longer, getting a new one only happens a handful of times in our lifetime.

Because cars are the second largest purchase we make, most of us put a lot of time and effort into researching and narrowing down our choices. And that’s great. My wife and I just bought a new car, and I must have put in over 40 hours of research, test drives and deliberation.

Our new car, a 2013 Hyundai Elantra

But what should you do after driving off in your new car? I have a few suggestions that will make your life easier and extend the life of your vehicle.

The first thing you need to do is shop around for the best car insurance rate. You’re required to have insurance before you drive off the dealer’s lot, which is fine, but you want to make sure you’re getting the best deal. Call at least three insurance companies and get quotes for your exact situation. If you have more than one vehicle, your best deal will come when you bundle them together. Let them know about your car’s safety features including airbags, running lights and whether it has an anti-theft system. They’ll ask you how many miles you drive each year, so have a number ready.

When you’ve found your best deal, don’t forget to take your old car off your policy if you sold it or traded it in.

Next, get in and play around with all the buttons and knobs. Don’t do this while driving. I know it’s tempting to play around with stuff as you’re driving home for the first time, but safety comes first. Read through the owner’s manual and become familiar with any safety features. Anything you may be tempted to fidget with while driving, do it now.

Speaking of safety, head over to SaferCar.gov and check for any recalls that have been issued for your model. Better yet, register for their recall notification system. You’ll receive an email as soon as a recall is issued. There are 600 vehicle recalls each year on average, so this system gives you an easy way to stay informed.

If your credit is good enough to qualify you for these historic interest rates, give yourself a pat on the back. I don’t think car loans will ever be this cheap again in our lifetimes. I just took out a 5-year loan at 1.99%. That’s cheap money! Take your time paying it off. Any extra money you have each month should go towards other goals, such as saving for retirement.

Finally, now is a great time to develop good maintenance habits. This is the biggest reason I decided to buy new, which I wrote about last week. New cars offer a blank maintenance slate. You know the maintenance history because you’ll be the one doing it. With used cars, who knows if the previous owner or owners stuck with the schedule. Nothing will extend the life of your car more.

Spearphishing Takes Spam to a New Level

The Ripoff Alert is a new series appearing once each week on Fridays. It alerts you to the latest scams and ripoffs trying to get between you and your money, and gives you information you need to stay safe. This is #16 in the series. 

Are you sure the email you’re about to open is legitimate?

Cybercriminals are ramping up their efforts by assuming the identities of legitimate companies and government agencies. They are deploying specific, targeted email attacks and taking identity theft to a new level in the process.

Criminals are moving away from blasting out millions of generic spam emails asking for your credit card number and are turning to a method that’s proven to be more effective.

By stealing company logos, email addresses and even exact copy from company websites, they’re able to make it appear the email is coming from the actual company. In a previous Ripoff Alert I talked about criminals who had hijacked Facebook’s identity and sent fake emails saying you’ve been tagged in a photo. Facebook isn’t the only victim in this scam; other well-known companies include Paypal, Amazon and even the IRS.

Consumers are used to interacting with businesses on the web and through email, so we don’t think twice about clicking links in emails that look like they come from a well-known business. But if you click a link in these emails, malware is installed on your computer that sits in the background and waits for you to enter sensitive information. It then captures your passwords and sends them back to the criminals.

Getting these emails to look real requires a lot more work than traditional phishing attempts, but the potential payoff is much greater. Just like savvy email marketers, they find ways to personalize the emails.

I found this interesting graphic from Smart Money, which compares traditional spam with spearphishing:

Notice that the “value per victim” is 40 times more with spearphishing. They may spend $8,000 more upfront, but that’s a rounding error compared with their increased profit.

What all of these fake emails have in common is urgency. You must act now or your tax return won’t be accepted, your Amazon order won’t go through, or you won’t be able to see the error Bank of America found with your checking account.

If you’re going to protect yourself online, you need to change the way you think about email. Even if you recognize the company and it’s one you regularly do business or interact with, you cannot continue to mindlessly open the email and click through. You need to stop and ask yourself: Am I sure this really came from the sender?

If you’re even the least bit unsure, find a new way to do what they’re asking. Open a new tab and log into the website yourself. Call the company to see if they really need anything from you. In the case of the IRS, they will never initiate contact with taxpayers through email.

It’s a lesson worth repeating: Think before you click and you’ll stay out of trouble.

The Case for Buying a New Car

Most money-saving experts support buying a used car instead of a new one as a way to save. Since buying a car is the second-biggest purchase we make, the potential savings are huge.

I’ve been thinking a lot about cars lately because of some personal circumstances. One of our until-now reliable cars decided it wasn’t going to start up, so we had it towed to the mechanic where it sits today, more than a week later. As luck would have it, our other car was involved in an accident the very next day. There were no injuries and the car is still driveable, but it leaves us in a tough spot. How much should we spend repairing these cars, considering they are 11 and 8 years old, respectively? Should we instead look at buying a new car?

I also discovered this excellent article over at the NY Times. The author talks about why it sometimes makes sense to spend a little extra to get something we really want. He decided to save up and buy a bike that was more expensive than he could afford at the time. He’s seen others go through three or four bikes in the time he’s had his. He argues that in some cases it makes sense to buy good things and own them a long time.

Buying a good thing (new car) comes with several benefits, the most important of which is reliability. That’s at the top of everyone’s list when car shopping. After all, the point of owning a car is to get us from place to place reliably, right? (Unless you’re a rock star, in which case you also need to arrive fashionably.)

With used cars, you have no idea whether the previous owner followed the recommended maintenance schedule. By buying new, you know the maintenance history because you’ll be doing it yourself. The best way to make your car reliable is to follow the maintenance schedule to a T. Sure, you could take a used car to a mechanic and have it checked out. But even if it’s clean, you don’t know what kind of use and abuse it was subjected to.

New cars come with a warranty, while most used cars are sold as-is. Used car salesmen are allowed to tell you lies about the car’s condition and history. I assume most are honest, but this is a pretty big risk to take to save a few grand.

Another important consideration is safety. Safety standards continue to improve, and with new cars you’re likely to benefit from the latest developments. Some of my favorites are electronic stability control, knee airbags and the blind spot indicators on rear-view mirrors. These features are found on many cars costing less than $20,000, which would have been unthinkable five or ten years ago.

Then there’s that new car smell. Who doesn’t like that?

Lots of people like to buy new cars, drive them four or five years, then trade them in towards a new car. They constantly make car payments instead of holding on to the car for a few more years, payment-free. These people have no business buying new cars.

If you’re going to buy a new car, plan to keep it at least ten years. Why ten? Depreciation is the largest cost of driving a new car. Not gas, not insurance or maintenance. Depreciation is the loss in a car’s value over time. It’s a ticking clock that erodes the value of your car, and starts the minute you drive off the lot. The hit you’ll take from depreciation is greatest in the first three to four years you own the car. In order to recoup these costs, you need to spread them out over time by driving that car at least a decade.

Buy a reliable new car, follow the maintenance schedule and keep it a long time. Your wallet will thank you.

Do you buy new or used? Why?

Photo by thefinancialphysician.com

8 Things You Should Never Keep in Your Wallet

The Ripoff Alert is a new series appearing once each week on Fridays. It alerts you to the latest scams and ripoffs trying to get between you and your money, and gives you information you need to stay safe. This is #15 in the series. 

With our crazy schedules, it seems these days our wallets and purses become collection bins for all types of stuff. Receipts, spare keys, password lists – anything you can think of. But I’ll show you why this isn’t a good idea.

We’ll start off with a list of 8 things you should never keep in your wallet from Kiplinger:

1. Social Security card

2. Password cheat sheet

3. Spare keys

4. Checks

5. Passport

6. Multiple credit cards

7. Birth certificate

8. A stack of receipts

  • Your Social Security card – along with your birth certificate and passport – are forms of identity you won’t need on a regular basis. They’re best left at home in a safe or at the bank in a safe deposit box. Anything with your Social Security number on it should also be removed. The only form of ID you should carry in your wallet is your driver’s license.
  • It’s a good idea to write down your passwords so you don’t forget them; just don’t keep them in your wallet. Even better, use an online password-management program like LastPass to store them securely. With LastPass you just have to remember your master password. Each time you visit a website it automatically fills in your username and password for you. Your passwords are encrypted with a special code, which means that even if someone was able to break into your account they couldn’t see your private data.
  • Being locked out of the house is annoying. But think about it – if your spare key is right next to your driver’s license (which has your home address on it) – you’re making it too easy for criminals. Instead, keep your spare with a trusted friend or neighbor.
  • Many of us have more than one credit card, but it’s best to leave most of them at home. By law your liability is limited to $50 if your credit card is stolen and used to make fraudulent purchases. If your debit card is stolen and you don’t report it within two business days, you could be liable for up to $500. I recommend carrying only the credit cards you use regularly (but no more than two total.) You can always call and cancel your cards if you wallet is stolen, but you want to limit the hassle you would have to go through.
  • Checks, especially blank ones, are an open invitation to loot your checking account. With your routing and account numbers, criminals have all they need to debit your account continually. They might also write checks as if they’re you, and if they bounce you could face a serious federal crime. Keep your checkbook at home to limit your risk.
  • Finally, get rid of those old receipts. It’s against the law for businesses to list your full card number on receipts, but the information on there gives criminals a head start in finding the remaining numbers. Keep important receipts at home in a safe place.

Bonus tip: After removing these items, make a copy of anything that’s left. That way if your wallet is stolen you won’t be left wondering what you had in there.