4 Steps to Avoid Financial Fraud in 2022 – Motley Fool

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Financial fraud could cause you major upheaval. Here’s how to avoid becoming a victim of it.

Key points

  • Financial fraud could cost you money and damage your credit.
  • There are steps you can take to spot fraud and avoid falling victim to it in the new year.

It’s easy to think of financial fraud as the sort of thing that happens to other people — not you. But even if you’re a savvy consumer, it’s easy enough to become a victim of criminal activity. Unfortunately, financial fraud can take on many forms and come with a world of unwanted consequences.

If someone steals your identity and racks up charges on a credit card in your name, that could result in major credit score damage. And if your credit score takes a hit, it could become difficult to borrow money when you need to or to rent a home when your lease is up.

That’s why it pays to do everything you can to steer clear of financial fraud in the new year. Here are four important steps to take.

1. Invest in a paper shredder

Many banks and financial institutions allow account holders to sign up for paperless statements. But even if you go that route, you might still receive documents in the mail containing sensitive financial data. If you simply toss those documents out, a criminal could get a hold of them and use them to initiate fraud.

That’s why a paper shredder is a really wise investment. For about $50, you can buy a machine that will render your sensitive documents unreadable even to the most persistent crook.

2. Check your credit report regularly

If a criminal gets ahold of your Social Security number, they can use it to open up a credit card or line of credit in your name. But if you check your credit report regularly, you might spot that fraudulent activity and nip it in the bud sooner rather than later.

Normally, you’re entitled to a free copy of your credit report once a year from each of the three reporting bureaus — Experian, Equifax, and TransUnion. In 2022, however, credit reports will be free on a weekly basis through April.

If you check your credit report at the start of the year and don’t see anything suspicious, then there’s probably no need to review it again the following week. But it is a good idea to check your credit report every three months to make sure there’s nothing shady going on.

3. Keep essential financial documents someplace safe

You may have certain financial documents you need to keep on hand and shouldn’t just shred. But it’s important to secure those documents as much as you can. Consider investing in a safe or look into renting a safe deposit box at your local bank.

Furthermore, if you have old credit cards you don’t really use but are keeping open to preserve your credit score, you might consider keeping them in a safe rather than in your wallet. That way, if your wallet is lost or stolen, criminals will have one less account to potentially access.

Along these lines, don’t carry your Social Security card around with you. It’s not something you need on a daily basis, but you could suffer immensely if that number gets into the wrong hands.

4. Know how to spot phone, email, or text message scams

Those annoying spam calls you sometimes get on your phone? Often, they’re criminals digging for information.

It’s important that you not respond to unsolicited emails, texts, or phone calls asking you to confirm your bank account details or Social Security number. If you do, you might end up making a criminal’s life very easy — and yours very difficult.

Similarly, don’t be scared into providing that information if you get a call threatening to garnish your wages. That’s a tactic scammers will use often, but your wages cannot be garnished unless you owe the IRS back taxes or a creditor gets a judgment entered against you in court (which is something you’d know about).

Also, know that agencies like the IRS and Social Security Administration won’t call, text, or email you out of the blue asking you to verify personal information. Those agencies will only contact you by mail, so if you get a call asking for your bank account details to process your tax refund, hang up.

Financial fraud can be a miserable thing to have to deal with. Take these steps to avoid being a victim in the coming year.

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About the Author

Maurie Backman is a personal finance writer who covers everything from savings to retirement to healthcare. Her articles have appeared broadly on major outlets such as CNBC, MSN, and Yahoo.