Overconfidence exposes many Americans to financial scams

Although 90% of U.S. adults express confidence in their ability to detect and prevent financial scams, more than a quarter (27%) of 2,432 online respondents reported falling victim at some point to them, according to a survey by Citi. This disconnect, the study says, emphasizes the need for continued vigilance, awareness, and education to keep consumers' finances safe.

"Today's scammers are nimble, well-organized and aided by sophisticated tools," said Michael Steinbach, head of financial crimes and fraud prevention at Citi.

"Scammers often deal in volume, and it only takes one successful attempt to profit. They are counting on you to be too busy or confident to spot red flags — and the consequences can be financially devastating. Particularly during the holiday season when scammers are very active, it's important to remain vigilant, listen to your instincts and turn to trustworthy sources of fraud and scam information to protect yourself."

Part of the problem is the proliferation and sophistication of scams, the report pointed out. Americans reported $8.8 billion in scam losses to the Federal Trade Commission in 2022 — a 30% increase from 2021.

While Citi's data found that most Americans are familiar with standard scamming methods like phishing (54%) and bank impersonation (51%), more than 1 in 10 (13%) couldn't identify any of the 14 common scams presented to them in the survey. Of course, familiarity with scams isn't necessarily preventing Americans from succumbing to them – 32% of Gen Z reported being victims of financial scams –  the highest of any age group.

The Consumer Financial Protection Bureau also has some useful information about various types of scams, including grandparent and impostor scams, mail fraud, charity scams, debt-collection scams, and FDIC-logo misuse scams.

The negative effects of scams

According to the survey, more than 7 in 10 (71%) adults who fell victim to a scam said it impacted their financial health, such as setting back their savings (38%), sending them into debt or more deeply into debt (29%), or lowering their credit score (18%). Survey respondents reported that they took several measures after falling victim to a scam, including blocking the scammers (45%), changing their passwords (37%) and contacting their banks (37%).

The good news, the survey said, is that Americans are taking steps to avoid scams, including getting actionable advice from a trusted source. When asked whom they trust the most for fraud and scam-prevention information, a majority (55%) cited their bank among their top three. However, only two-thirds (67%) routinely check their account statements and credit scores to monitor for unusual activity.

Keeping accounts safe

According to Citi, the following steps can help keep accounts safe:

1. For additional account security, add biometric login, such as facial or fingerprint recognition for mobile devices, and a second factor of authentication, such as a one-time passcode sent to a trusted device.
2. Create robust, long and unique passwords or passphrases for each website.
3. Secure crucial numbers such as PINs, Social Security Numbers, or driver's license numbers. For example, shred documents containing personal information, don’t share crucial numbers and don't enter personal information on a public computer.
4. Don't reveal personal or financial information to people you don't know, whether by phone, email, mail, in-person, or social media.
5. Trust your instincts if something seems off. Don't allow yourself to be persuaded by a false sense of urgency or by an opportunity that looks too good to be true.

Find the complete survey here.  Unless otherwise stated, all figures are from YouGov Plc. The total sample size of the survey was 2,432 adults. Fieldwork was undertaken between

 

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected]. 

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September 8 – 12, 2023. The survey was carried out online. The figures have been weighted and are representative of all U.S. adults (aged 18+).