No matter how smart you are you could still become a victim
6 Reasons Smart People Fall for Scams
by Amanda Geronikos, courtesy of MoneyTalksNews.com
Texting Scams Target Credit Cards
Top 5 Internet Scams
Think it's just the uneducated or the elderly who fall for Ponzi schemes and deceptive infomercials? Think again. Many victims, particularly those of investment fraud, are educated, wealthy, and financially literate, according to an AARP Foundation study.
Consider the case of Bernard Madoff, whose notorious investment scandal fooled thousands of individuals, including celebrities (Steven Spielberg), financial institutions (HSBC), and schools (New York University).
How exactly does this happen? In this video, Money Talks News founder Stacy Johnson talks to psychology professor Gene Cash about the reasons we fall for scams. After the video, read on for more reasons why smart people do dumb things.
Here are some more factors that contribute to our poor decisions:
1. People aren't always rational.
Every person, at one point in his or her life, has made a quick, irrational decision. Most of us have fallen for the occasional April Fool's joke or Internet hoax. It's a part of human nature. In his book, Who Is Rational? Studies of Individual Differences in Reasoning, writer Keith Stanovich explains irrational decisions derive from impulsive, non-reflective cognitive styles, often driven by emotion. This is why some individuals are inclined to send money to the desperate student stuck in Europe; he simply needs some cash to get back to America, where he'll be safe.
2. We're attracted to financial gain.
Irrational decisions are driven by emotion, and our feelings, of course, are heightened when we see something we can benefit from financially. A promise for a $100,000 reward is quite appealing, especially to the father who just lost his job. In recent years, scam artists have taken advantage of America's struggling economy, enticing consumers with everything from fake deals for renters to get-rich-quick schemes.
Here's a hint: If something seems too good to be true, it probably is. Take that as your first signal to do some investigating.
3. We're more vulnerable when we think we're an expert.
According to a study by the University of Exeter, individuals are more vulnerable to a scam if they are knowledgeable about the scam's subject. For example, lottery ticket buyers are more likely to fall for lottery or sweepstakes scams, while investors are most susceptible to investment fraud. When individuals view themselves as an expert, they're more likely to let their guard down.
4. People don't like to back down from a long-term commitment.
Once a victim starts spending money, it's difficult to stop. Many people worry their time and investments will go to waste if they don't follow through with the process. A consumer is promised to feel healthier with those herbal pills or guaranteed to look younger with that wrinkle cream; that's after he or she has paid monthly installments and used the product for at least two years.
5. We have a tendency to trust authority.
Many of us have an obligation to obey authorities, and therefore, we trust them. As a result, scam artists send us fraudulent emails that appear to be from trusted organizations, such as banks and loan companies. In a common scam, consumers receive emails that appear to be from the IRS; they are asked to provide personal information in return for a tax refund they haven't yet claimed. Scam artists will also pose as employees from your water company, insisting you need to pay for a water test in your home.
If you're unsure if you're dealing with a legitimate source, look up the contact information of the company or organization (even if a number is provided in the literature you have in your hand), call the number you find, and ask questions to see if all the facts match up. If a scam artist appears at your door, always ask to see identification and don't hesitate to turn him away if that quick flash of a badge seems suspicious.
6. Scare tactics, well, scare us.
Many scams require that we act fast, or we'll lose everything we have. In a scheme reported in September, scam artists told people they kidnapped a loved one and would hurt or kill that person unless they were paid. In this situation, victims are made to feel helpless, so they hand over any money they have.
Like this article courtesy of MoneyTalksNews.com? Sign up for their email updates and they'll send you a regular digest of their newest stories, full of money-saving tips and advice, free! They'll also email you a PDF of Stacy Johnson's "205 Ways to Save Money" as soon as you've subscribed. It's full of great tips that'll help you save a ton of extra cash. It doesn't cost a dime, so why wait?
Share your thoughts about this article with the editor: Click Here
Also in Critical Condition
- Reviving your financial New Year's resolutions
- Are you guilty of financial infidelity?
- Could your mind be dictating what you spend?
- Answers to 10 tough bankruptcy questions
- 5 ways to rebound from a financial disaster
- Unemployed: Cash out my 401(k) or roll it over?
- 10 steps to take before bankruptcy
- 5 questions to ask before an impulse purchase
- 6 risky ways to pay off your credit card debt
- Calculate the real cost of your debt
- Debt pay-down calculator
- Calculate the true cost of paying just the minimum
- Reduce credit card debt calculator