Avoid Scams and Money Traps

Here are a few of the most popular traps to avoid:                                                                                         

Rent-to-Own Stores:  These stores allow consumers to rent items such as furniture and appliances and take them Home immediately without having to put any money down.  Consumers then pay a weekly rental fee to the merchant until the item is paid for in full.  Sounds too good to be true…right?  Of course.  Here’s the catch.

• The prices for these items are extremely inflated, much higher than they would cost in a regular store.
• The item that you are renting is most likely a used item and usually of poor quality.
• Also, if you are late on a weekly payment, the store can repossess the item without giving you back any of the money that you already paid towards it.

Pay Day Loans:  This is when a lender gives you a cash advance on your paycheck, for a fee.  How it works is you write a lender a check, post-dated for the next time you are expected to get paid.  When you get paid, the lender cashes this post-dated check to recoup their loan. Sounds reasonable, right?  Think about it.  Now you are in the same predicament you were before, because as soon as you get paid, you can’t use any of the money because it has to go to the lender, and now you are also out the fee that the lender charged for this loan!  Not a good idea.  Avoid Pay Day Loans at all costs!

Refund Anticipation Loans (RALS) and Refund Anticipated Checks (RACS):  Again, these are cash advances based on your federal income tax return, for a fee.  This means that you can get your tax return money right away, instead of having to wait for it. Sounds great again, right? Wrong!  Here’s why:  If you file your taxes on-line, you get your refund within a week or two, anyway and you don’t have to pay a fee.  (The fees for RALS and RACS are extremely high, even higher than the APR for a cash advance on a credit card)!  Just do your taxes for free and wait a few days for your return.  No big deal.  Don’t lose money for no reason!

Stored Value Cards:  An example of this is a phone card which kind of looks like a credit card. You buy one for a certain amount of money, and this amount gets applied to the card. Every time you purchase a good or service, the amount you spend gets deducted from the original card amount. At first glance, this seems reasonable. And many vendors who offer these cards are legitimate. But unfortunately, some aren’t. A popular money trap is the stored value card for phone usage. Let’s say you pay $20 for a phone card.  There may be hidden service fees and user and inactivity fees. This means you don’t actually get $20 worth of phone usage.  Many phone card venders use a rounding system that rounds your minutes up to the nearest 3 or 8 minutes instead of the nearest one minute like reputable cell phone companies do. You can end up paying 8 or 13 minutes for a 5 minute phone call!  Please use stored value cards with caution! Do your research to make sure the company is legitimate and know the fees you may be charged before you buy the stored value card.          

Beside these money traps there are also Sweepstake and Prize Promotion scams that can sucker consumers!  Be aware that there is no purchase necessary and no fees required to enter or win a legitimate sweepstakes. Unfortunately, most are scams. If you receive something in the mail describing a valuable prize that you can win if you send back a completed form plus a fee, or after making a purchase to enter…this is a scam. There is no prize, and you will lose the money that you sent in.

Prize Promotions are often confused with sweepstakes.  These promotions usually begin with congratulating a consumer for being a winner of a valuable prize. Terrific! Well, not really.  It then requires the consumer to pay money in order to receive the prize, by either charging exorbitant amounts of money for shipping and handling of the prize or by having you call a 900 number to claim the prize. The consumer is most likely charged heavily for this phone call.  The operators of these scams (oops, “promotions”), make their money because these “valuable prizes” cost much less than the fees you’ll pay to claim them.

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