Scams are common. According to Bankrate, 40% of American adults say they’ve experienced some form of fraud or scam in the past year.1 It can happen to anyone, even the smartest among us, and it’s a misconception to think that only uninformed or low-intelligence people fall for scams or get defrauded. Scammers can target just about anyone, intelligent or not.
How Scammers Prey on People
Scammers prey on people’s emotions.2 Anyone, regardless of their intelligence or level of education, can be scared, desperate, or tempted by the prospect of easy money.
One study3 also found that people who live alone may be more vulnerable to scams. Feelings of loneliness, isolation, or exclusion were associated with a greater risk of falling victim to fraud—factors that have little to do with intelligence. Having someone to talk through a suspicious offer or unexpected request with can provide a valuable second perspective.
In other words, falling for a scam isn't necessarily a matter of how smart or financially savvy someone is. Scammers are skilled at exploiting emotions and circumstances, including loneliness, fear, financial desperation, or the hope of an unexpected windfall. They may also appeal to the desire to make easy money or get in early on a promising investment. In all of these cases, emotion can influence decisions before reason has a chance to catch up.
Common types of scams
Scams can take countless forms, and new variations appear all the time. But many rely on the same basic tactics: creating urgency, confusing you, exploiting your trust, or promising an opportunity. Knowing how some of the most common scams work can make the red flags easier to spot.
Phishing
Scammers often impersonate trusted institutions, such as credit unions, government agencies, or credit card companies, to trick people into sharing personal or financial information. They may reach out by email, text message, phone call, or social media.
An unexpected message from a financial institution, the IRS, or a credit card company can trigger a stress response in a lot of people, especially if it claims that money is owed or there's a problem with an account. Scammers count on this, and hope that their victims disclose information without thinking about who they're actually interacting with.
Ponzi and Pyramid Schemes
Ponzi schemes4 are investment frauds in which victims are promised high returns, but instead of generating legitimate profits, scammers use money collected from new investors to pay earlier ones. Those apparent returns can encourage victims to invest even more. Eventually, when there aren’t enough new investors to keep the scheme going, it collapses. In recent years, Ponzi schemes involving virtual currencies⁴ have also become more prevalent.
Pyramid schemes operate somewhat differently but also depend on a continuing supply of new participants. Rather than generating revenue primarily by selling legitimate products or services, participants make money by recruiting others into the scheme. Because recruitment can't continue indefinitely, pyramid schemes are ultimately unsustainable.
What about multi-level marketing?
Multi-level marketing (MLM) businesses aren’t automatically pyramid schemes. In a legitimate MLM, participants can earn money from retail sales to customers without having to recruit new distributors. If the opportunity depends primarily on recruiting new participants rather than selling products or services to customers, however, that can be a warning sign of an illegal pyramid scheme.5
Affinity Scams
Affinity scams often overlap with Ponzi and pyramid schemes, but are notable for the way they exploit communities and social trust. They may target people connected through family relationships, religious organizations, cultural groups, professional organizations, or other communities.
Scammers may pose as respected community leaders or business owners or enlist influential members of a group, sometimes without those people realizing they’re helping promote a fraud.6 The trust that already exists within the community can make the scam appear more credible.
For example, a Corvallis man was sentenced in 2023 for an investment scheme that solicited members of his church, coworkers, and acquaintances. He also falsely claimed that his organization supported Christian missionaries and organizations. He was ordered to pay more than $1.75 million in restitution.7
Pig Butchering
Pig butchering scammers play the long game. The term refers to the practice of fattening a pig before slaughter and describes the way scammers cultivate a relationship with a target before attempting to steal their money.
A scammer may pose as a friend or romantic interest and spend weeks or even months building trust before introducing an investment opportunity or asking for money. By the time money enters the conversation, the relationship can feel genuine. Once the scam has run its course-or the victim stops sending money-the person they thought they knew may disappear.
Tips for Avoiding Scams
Avoiding scams isn't about being smarter than the scammer. It's about recognizing when someone is trying to manipulate how you think, feel, or act. Here are a few ways to give yourself time and space to recognize those tactics before you respond.
1. Don’t engage with suspicious communications
The less you engage with scammers, the less opportunity they have to steal your money or personal information. Unexpected emails, phone calls, text messages, social media messages, and other communications should be treated with caution, especially if they ask for money or personal information. Learning to recognize and ignore or report such messages is a big step toward making sure scammers can't get their hands on your assets.
An email address that ends with an unusual domain, or a website URL that's just slightly off, can be a dead giveaway. If you have any suspicion at all that a phone call, email, or other form of communication is a scam, err on the side of caution. Don't click links, download attachments, or provide personal or financial information.
2. Contact institutions independently to avoid phishing
If someone suspicious calls or emails and says they're with your financial institution or government agency, don't automatically take their word for it. Instead, end the conversation and contact the organization yourself using a phone number or website you know is legitimate.
For instance, you get a threatening call from someone claiming to represent your credit card company, immediately hang up, look up the company’s contact information on the back of your card or log directly into your account from their app or website.
3. Slow down
Pressure to act quickly is a common scam tactic. So, if someone asks you to invest money quickly, that can be a red flag. Scammers may create a sense of urgency or fear of missing out to keep you from taking the time to investigate what they are telling you.
It's entirely reasonable to say "I need to check on a few things" or "I need to discuss this with my spouse" before making a big financial decision. Be especially cautious when someone insists that you to put money down fast. Legitimate businesses and investment professionals should give you time to understand what you're agreeing to.
4. Ask for documentation
If someone approaches you with a financial opportunity, ask for documentation. Vague business plans, lack of transparency about what an opportunity entails, or an unwillingness to provide documentation are all red flags. A reputable business or investor will be able to show their work and won't rush you into signing. Real investments are based on strategy, reason, and analysis, not fear.
Once you have details, verify the information independently. Research the company and the person offering the investment. Check whether they are properly license or registered when applicable. Don't rely solely on testimonials, documents, or websites provided by the person asking you for money.
Real investments involve risk, so be skeptical of anyone promising guaranteed returns, unusually high profits, or an opportunity with little or no risk.
If you do fall for a scam, it's not because you're not smart. Scammers succeed by creating emotional reactions and using those feelings to influence decisions. It happens to a lot of people, but knowing the warning signs can help. If something involving your money doesn't feel right, give yourself permission to stop. Take a moment to notice what you're feeling, think through what's being asked of you, and verify the situation independently before you act.
- Dramer, Sara (2026, March 4) More Americans are falling victim to financial fraud and scams. Bankrate ↩︎
- Langabeer, James R. (2025, June 25) Why Smart People Fall for Fraudulent Schemes. Psychology Today ↩︎
- Finra Foundation (2019, September) Exposed to Scams: What Separates Victims From Non-Victims? ↩︎
- Investor.gov Ponzi scheme. U.S. Securities and Exchange Commission ↩︎
- Federal Trade Commission Consumer Advice (2022, July). Multi-Level Marketing Businesses and Pyramid Schemes. Federal Trade Commission ↩︎
- Investor.gov. Affinity Fraud. U.S. Securities and Exchange Commission ↩︎
- U.S. Attorney’s Office, District of Oregon. (2023, August 16). Corvallis man sentenced to federal prison for orchestrating fraud scheme claiming to support Christian missionaries and organizations. U.S. Department of Justice. ↩︎