Forget the ghosts and goblins at your door this Halloween or even the things that go bump in the night. What’s truly horrifying is what can happen to your hard-earned money if you are not vigilant.
“Scary financial things can happen if you are not careful and aware,” says Leslie Tayne of Tayne Law Group, a debt management and resolution law firm based in New York. Tayne says she is all too familiar with financial scenarios that leave individuals and families strapped for money or even penniless.
The top horror shows? Tayne identifies several: identity theft and hackers, co-signing gone wrong, scams and more.
Imagine waking up to harassing telephone calls from a bill collector about a debt you never owed, watching your car being repossessed or getting your cellphone service shut off because of “delinquency.” Or worse, losing a potential job because a background check shows a warrant for your arrest for a crime you didn’t commit.
“If you saw the movie ‘Identity Thief,’ you saw these things portrayed in a funny way, but if it happened to you it would not be a laughing matter,” says Robert Hammond, author of the book “Identity Theft: How to Protect Your Most Valuable Asset.”
Don’t think it can happen to you? According to a recent survey by Javelin Strategy & Research, there were more than 12 million identity fraud victims in 2012 in the U.S., which equates to one victim every 3 seconds. The most damaging breach involved Social Security numbers, the study found.
The solution? Awareness, experts say. Protect your personal information by not leaving credit cards, monthly bills or your Social Security card lying around the house or stuffed in your wallet. Keep these items in a safe place. Shred any solicitations for credit cards or bills you no longer need. If you do become a victim, contact your creditors immediately, Hammond says. Also, notify all three national credit reporting agencies: Equifax, Experian and TransUnion.
Scams run the gamut from phony charities to sophisticated online thievery that can get you to open your wallet or give your credit card number.
“Your heart might be in the right place, but it is important that when donating money to charity that you do your homework to avoid being conned,” Tayne says. If you are solicited via your front door or phone by a charity, research the company first to make sure they are a reputable, legitimate organization.
Also watch for fake debt settlement companies, Tayne says. “Look out for red flags. One of the common telltale signs with scamming is being asked for money upfront or not allowing for an in-person consultation.”
Online scams are even more threatening, says Steve Weisman, author “The Truth About Avoiding Scams.” The creepiest is keystroke-logging malware that steals your personal information off your electronic devices.
“People unwittingly download (malware) by clicking on links in tainted websites or emails. … (The information) is sent to an identity thief who can use it to empty your accounts and get credit in your name,” he says.
While you may think you are helping make dreams come true for a family member or friend by co-signing a loan, it could turn out to be a nightmare for you if the person does not make good on the loan.
While you may not realize it, if the person you have co-signed for defaults on the loan, you are responsible for repaying the debt, putting your own credit standing, credibility and finances on the line. You run the risk of not only increasing your debt. In addition, if you can’t pay it back, you could have your bank account frozen, wages garnished and credit score lowered for the defaulted loan, Tayne says.
Before signing on the dotted line, make sure that you set ground rules about repayment, Tayne says, and you need to be confident that the person will make timely monthly payments. Otherwise, you will end up with not only more bills to pay but also a ruined relationship.
They arrive like angels at the most vulnerable moments — after a divorce or death of a spouse. But these “helpers” are actually not looking after you at all, says Mela Garber, a tax principal at Anchin, Block & Anchin in New York.
“This is the scariest financial scenario I’ve observed in my 30 years of work,” Garber says.
The scheme works like this: A recently divorced or widowed woman (it can happen to men, but it is primarily women who have not handled finances before) is approached by a charming and kindly stranger who has ideas to help her overcome her grief and solve her financial worries, Garber says.
The con involves showering the victim with attention when she is at her most vulnerable, she says. But the warning signs are there: The con artist runs into financial difficulty and the victim feels obligated to pay, jeopardizing their own debt situation. “As the person moves closer to the victim, he gains more control of her finances,” Garber says.
Garber warns that this kind of con can happen at any wealth level. “When someone new comes into your life when you are vulnerable because of a death or divorce, you need to be alert and suspicious,” she says.
Staying alert and aware not only goes for other people in your life but also for yourself. You may be doing things in your daily life that are slowly draining the lifeblood from your finances.
For instance, take bank fees, says Tayne of Tayne Law Group. “You may be charged with fees from your bank without even realizing it.” For example, many banks will offer free checking and savings on the condition that a minimum amount of money is maintained in the account and/or regular direct deposits are made. But if you are unaware of the fine print, you could quickly rack up bank fees without knowing it.
“While the fee may be minimal, it can quickly accumulate if it goes unnoticed throughout the year,” Tayne says.
Another financially draining scenario is taking out too many credit cards. If you have too many credit cards and don’t keep track of your statements, you may miss a payment or find yourself with too much debt, Tayne says.
The solution: Monitor your credit card statements carefully. If you have multiple credit cards with varying due dates, consider contacting each credit card company to make the due dates the same. “This will help minimize the risk of overlooking bills and missing payments, which could eventually impact your credit score,” Tayne says.