Beware These Common Digital Wallet Scams

Sep 10, 2021

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How to avoid getting bamboozled by a fraudster using peer-to-peer payment apps to steal your personal information or swindle you out of funds.  

Digital wallets or cash-sharing apps such as Venmo and PayPal have made sending and receiving funds easier than ever, providing a quick and simple way to gift or lend money, split a bill, or pay a friend, family member or acquaintance. Fraudsters appreciate the expediency of mobile payments as well  — finding ways to exploit the rapid communications they involve with the aim of catching victims off guard. But there’s no need to forego these conveniences, as long as you stay alert to the tactics scammers are using, and take basic steps to protect yourself. To safeguard your money and sensitive information, familiarize yourself with these common schemes, along with tips to avoid them:

The “Oops, I accidentally sent you money” scam:

With this popular grift, you’ll get a message in Venmo (or other digital wallet) from someone claiming that they mistakenly sent you money intended for another person. The person pleads with you to return the funds, and you notice a credit has appeared in your cash-app for an amount, perhaps several hundred dollars, a thousand, or more.

If you’re a decent and law-abiding person, your first instinct will likely be to return the money. After all, it seems easy enough to mistype a username in the app. However, there’s a good chance that the person who sent you the money has used stolen credit card details to deliver the funds. In this scenario, once the scammer has transferred the money to you, they will remove the stolen card information from the fake Venmo profile they’re using, and link their own card details or bank account information to it instead.

Once you transfer the money back to them, the scammer immediately withdraws the funds. In the meantime, the person whose credit card details were stolen contacts their provider. The bank will block the card and reverse charges — removing the money from your account. And unfortunately, as the Better Business Bureau explains, many payment apps will not cover the cost of this kind of fraud, which means you may not have recourse to get your money back.

How to handle an “accidental” money transfer:

 If you get a message from someone who says that they sent you money accidentally, your best bet is to open a support ticket with Venmo, or whatever cash app you’re using. Instead of engaging with the sender, Fraud Prevention Unit recommends letting the digital wallet vendor know that you received funds that you did not request, and that you’re concerned about fraud. After that, let the vendor handle the situation.

An urgent message suggesting that your account has been hacked, or is about to be suspended, or charged:

Phishing scams in which fraudsters attempt to deceive you into divulging confidential personal information by posing as a legitimate enterprise have become quite commonplace over text message, so much so that we even have an annoying term for it — “smishing” (SMS phishing). The criminal may employ one of a variety of tactics to spur you into immediate action before you realize what’s going on. Often, the goal is to get you to click on a link to a fraudulent webpage where you will be prompted to provide your account credentials, credit card information or other personal details. In some cases, you may get a message in your app that your account is about to be suspended, or charged for something you didn’t buy. At Yahoo! Finance, Technology Editor Daniel Howley describes how he received a text message regarding  $13.50 he had supposedly sent to someone he had never met. The scammer clearly intended for him to panic, think his Venmo account had been hacked, and then click on a link to a bogus website, where he would reveal his personal information for the criminal to exploit.

Bottom line for dealing with dubious texts marked for immediate attention:

Resist the urge to open a suspicious text and click on any links it may contain. Also keep in mind that cash-app vendors generally won’t ask you to enter your password unless you are actually at their login page, as the BBB has pointed out. Furthermore, don’t get rattled by a text claiming that you sent money to someone you don’t know. You can check your account for fraudulent transactions quickly enough by opening your app. If nothing appears off, delete the suspicious message from your phone. If you still have concerns that your account may have been compromised, get in touch with the app provider. But avoid searching online for a  phone number to customer service, because fraudsters may use spoofed websites to try to misdirect you. Instead, go directly to the company’s website, making sure that you have spelled the company name correctly, and that the site is trustworthy. Also be aware that some peer-to-peer payment systems may not provide phone support.

The unexpected money request from a friend:

Scam artists have been known to impersonate people in a user’s network of family and friends, using a fake profile to request a payment. In some cases, the fraudster is banking on a scenario in which you actually won’t bother checking with the person to find out why they are asking for the money. After all, this can be an uncomfortable topic to bring up, with plenty of room for confusion and awkward exchanges. But in some cases, the request will come with an explanation. For instance, you could get a message that ostensibly comes from a friend who has lost their wallet and needs emergency cash.

What to do if you get an odd request for payment from someone you know:

It pays to be wary of an unusual request for payment through a peer-to-peer payment system. If someone you know unexpectedly asks for money through Venmo or a similar service, call or text them to confirm the request. If you can’t reach the person, the BBB suggests tapping on their Venmo profile to view their transaction history and information.

A general caution about buying or selling to someone you don’t know using a digital wallet app:

As Privacy Hub points out, Venmo and similar apps were primarily designed for personal use, which would include transactions between friends, family members and acquaintances. As such, it’s important that you trust the person that you’re buying from or selling to through these services. Fraudsters may purport to have an item to sell, then disappear once they receive payment. Another scheme is to cancel a transaction before it is completed. So before shipping any item you’re selling, be sure to confirm the transfer. Also note that criminals may try to buy items using stolen credit cards, in which case a seller could be deceived into turning over an item, only to later discover that the transaction has been determined to be fraudulent, resulting in funds being removed from the seller’s account.

If you do decide to conduct personal business with someone you don’t know personally through a digital wallet, be sure that you fully understand the risks that you are taking. Privacy Hub reminds us that apps like Venmo don’t have buyer protection policies, and that Venmo advises against using the app for online sales except for commercial transactions expressly authorized by Venmo. But regardless of how you use your digital wallet, bear in mind that it’s generally best to link this account to your credit card, which will offer greater protections than your debit card or checking account can provide in this case.

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