The simple trick to spot a scam

Unfortunately, scams are all around us. Sometimes it's intentional, sometimes it's not.

Many years ago, I bought an airline voucher from someone online. I paid them 50% of the value of the voucher but then discovered that I couldn't use the voucher on the flight I planned. There were some restrictions on the voucher and the seller decided that he wasn't going to refund me my money. In fact, he decided to stop responding to calls and emails. I was out about a hundred bucks and I learned a valuable lesson.

Scams are all around us but check out this very simple trick to spot a scam - once you learn it, you'll never forget it.In my case, the seller wasn't planning to scam me. The voucher was legitimate, albeit with restrictions I suspect neither one of us were too clear on. The voucher was delivered to me. If it worked, everything would be dandy. The seller was simply an opportunistic scammer and to be 100% honest, I didn't see it coming.

Years later, with more experience under my belt, I knew that buying a voucher from a stranger on the internet is risky at best.

So today, I'm going to give you my best tip for figuring out whether something is a scam. It's so simple that you'll shake your head in disbelief.

Ask the opinion of five people who you believe are smarter and/or more cynical than you. Then believe them.

If you're too embarrassed to ask, it's probably a scam.

If you're afraid someone will steal it from you, it's probably a scam.

Your ability to spot a scam might not be well developed but you probably know someone whose scam meter is on point. You certainly know five people whose average scam meter is spot on.

Ever heard of the Nigeria 419 scam? It's when some prince in Nigeria tells you that they have amassed a wealth that is locked up somewhere. He just needs a few thousand bucks to unlock it and you're the person to do it. It's known as an advance fee scam or the Spanish prisoner scam. No matter the name it's acquired over the years, it's still a scam. Tell five friends, one of them will have heard about it and warn you against sending this dude your money.

Joining a market research company or some other business opportunity and they want you to pay? They ask for an application fee before you join because they need to process paperwork and other gobblygook – it's a scam. It's a common survey scam but you may not have heard of it before – fortunately one of your friends might tell you that they've never applied for a job and had to pay an application fee.

Selling something on Craigslist? You're selling something for $200 and the guy says he can pay but will pay you with a wire transfer of $500, he just needs $300 back. You should know that's a scam, why in the world would someone pay you $500 and ask for $300 cash and the item? If you aren't sure, ask five friends. Someone will bring you to your senses!

The IRS won't call you about an audit. And they won't accept payment in iTunes gift cards. (but if you need to talk to someone, here's how to reach a live person at the IRS)

This applies to a lot of things in life.

Not sure? Ask five friends you trust. One of them will set you straight!

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About Jim Wang

Jim Wang is a forty-something father of four who is a frequent contributor to Forbes and Vanguard's Blog. He has also been fortunate to have appeared in the New York Times, Baltimore Sun, Entrepreneur, and Marketplace Money.

Jim has a B.S. in Computer Science and Economics from Carnegie Mellon University, an M.S. in Information Technology - Software Engineering from Carnegie Mellon University, as well as a Masters in Business Administration from Johns Hopkins University. His approach to personal finance is that of an engineer, breaking down complex subjects into bite-sized easily understood concepts that you can use in your daily life.

One of his favorite tools (here's my treasure chest of tools,, everything I use) is Personal Capital, which enables him to manage his finances in just 15-minutes each month. They also offer financial planning, such as a Retirement Planning Tool that can tell you if you're on track to retire when you want. It's free.

He is also diversifying his investment portfolio by adding a little bit of real estate. But not rental homes, because he doesn't want a second job, it's diversified small investments in a few commercial properties and farms in Illinois, Louisiana, and California through AcreTrader.

Recently, he's invested in a few pieces of art on Masterworks too.

>> Read more articles by Jim

Opinions expressed here are the author's alone, not those of any bank or financial institution. This content has not been reviewed, approved or otherwise endorsed by any of these entities.

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  1. Alex Louie says

    I fell for a Craigslist scam listing two “half-price” Broadway musical “Wicked” tickets.

    When I met with the seller, I was so happy that I got a half off deal for a popular show that I failed to call the phone number to double check if they were real.

    The tickets were printed on paper as Ticketmaster tickets and they seemed legit.
    I showed up and told the tickets were fake.

    End of story: I paid 150% for my tickets.

    Quick question: What made you decide on the “asking five friends rule : then believe them” rule?

    • Jim Wang says

      That stinks 🙁

      As for the five friends, I realized that when I’m suspicious of something, I always ask one person (my wife). If she’s suspicious, it’s usually a no go anyway. But if she’s not sure, I look to a few other folks whose opinion I trust. I figure five is enough people to get a good consensus. Do you get better consensus with 6, 7, 8? I don’t know. Do you really need five? I don’t know that either.

      But with five, I feel pretty confident my process is solid even if the outcome isn’t. Did that explanation make sense?

  2. Centsai says

    Growing up in school, my teachers would always say “ask 3, before me” and I think this can be somewhat applied here! What she meant by this was that if you are unsure of something ask 3 of your peers and then ask her. Your trick of how to spot scams by asking 5 friends is very similar to how you are taught at a young age in elementary school! The key theme here is that if you are uncertain about something ALWAYS ask a few other people to get some advice and opinions!

  3. Michael Orr says

    Nice rule, but I’d make it two-step: (1) Ask your most Cynical friend. if the answer is “avoid”, avoid it. Better safe than sorry. If the answer is “not sure” then ask 4 more.

    BTW, the recent IRS scam reported (that prompted this entry, I guess) puzzles me. IF 15,000 were scammed out of 300 Million, means the average scam was for 20,000. I work in Silicon valley, in High tech, and my IRS bill/refund never gets to the range of $20,000. So how could people who supposedly owed IRS 20,000 still be naive enough to fall for “send Money now by card or wire or else” line?

    • Jim Wang says

      I like your two step method too – I wanted to keep mine as simple (but still get the point across) so I kept it at one step. I suspect that most people would believe their most cynical friend, but “fear of missing out” might get the better of them. If you ask five, it’s hard to argue.

      About the math, it puzzled me too. When you do the math and arrive at $20k, that would be a settlement figure. So the amount owed would be more because you have to convince the person they can settle it with iTunes gift cards for far less. BUT there are so many tax situations… there are people who haven’t filed a tax return in years. There are people who don’t understand the law so maybe they sold a house, were told something, and now aren’t sure if they owe taxes on the sale. Who knows?

  4. Mustard Seed Money says

    My wife got really lucky. She bought earrings from ebay and the person never sent the item. Luckily, ebay was good and refunded my wife the money and kicked the guy off. But definitely an infuriating feeling when something doesn’t work out.

  5. Yetisaurus says

    Good advice! I know someone who got swept up in a scam before. Her B.S. meter was broken, so she got taken by someone online who said he was going to send gold bars into the country and split the proceeds with her if she could only afford the customs tax. He got her to send a reasonable amount of money, and then a little more because a “complication” arose, and then a little more. By the time she realized it was a scam, the scammer had her address and phone number and knew her kids’ names. She told him she was done messing around with him, so he turned to threats. He told her she had already engaged in illegal activity by wiring him some money, and threatened to harm her kids. Scary, scary stuff. If your B.S. meter is broken, you better take that “5 friends” rule to heart!

  6. Latoya | Femme Frugality says

    Yeah, some of these are just good common street smarts; however, it’s unfortunate that some people do fall for these types of things. That’s why the five friend advice is superb because you’ll be listening to someone with a little more experience than what you may have.

  7. SueDip says

    5 friends rule is fine but if you take the time to ask five friends then you probably already have a bad guy feeling about the situation. Many scammers don’t give you that luxury, they get you on the phone and pressure you to make a decision on the spot.

    • Jim Wang says

      I’ve always wondered why pressure selling works as well as it does, I recognize they couple it with scarcity (you have to do it now or you miss out!) but how many things in life are every like that? If you don’t take advantage right now, it’s gone forever? Nothing. It’s almost always man made.

  8. Lin says

    I work for the postal service and know about the Nigerian scam We get trays of that kind of mail that goes to the inspectors.I remember reading about the scammers who would ask you to cash a check for them ( Postal money order) and keep a certain amount and then send the rest of the money to them via Western Union.I figured it was a scam and took it to the post office The people there told me that the check was a fake and it was a good thing that I turned it in Hopefully the crooks got locked up Beware

  9. Nicole says

    I believe I have been a chosen one!!! Revived my mystery shopper job and a check for almost 3,000 well I started searching the cashier check and the letter head, found the bank but can’t find the company. Also found who I think sent the items to me through the mail on Facebook. I’m not so sure what to do about it. Kinda nerve racking that this person now has my address… any ideas on what to do?? Thanks

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