How to manage common types of financial fraud: First steps to take

Learn the first steps and what you should do if financial fraud happens to you and different ways to stay safe from scammers.

According to the Federal Trade Commission‡, Americans lost $10 billion in fraudulent scams in 2023. This is an increase from years prior and, unfortunately, something that will most likely continue to grow as scammers become more sophisticated. Given many people will experience fraud in their lifetimes, it is important to understand how to manage financial fraud and protect yourself from it happening again.

What to do if you suspect financial fraud

With scams becoming more prevalent - and sophisticated - the first step for protection is to be vigilant and monitor all of your accounts closely. If you suspect financial fraud, it is important to immediately start the fraud reporting process to allow the bank to act quickly in protecting your account and possibly recover stolen funds. One key item to note: a fraudulent charge is one you did not authorize or did not participate in. Disputing a charge you made because you had a disagreement with the merchant or the goods/services were not as expected follows a different process.

For a fraudulent charge, the first thing you should do is contact your financial institution or credit card company to report the fraudulent charge or transaction on your account. You can ask for the charge to be reversed or potentially stopped if the funds haven't left your account yet. The good news is that if you suspect fraud, accounts can be frozen and new card numbers can be issued for both debit and credit cards. This is an effective way to stop additional fraudulent activity.

What are the most common financial crimes?

Below, we identify and walk through the actions you can take for the most common types of financial fraud. Financial fraud can occur through information and account breaches you may not have invited, as well as through transactions you willingly make under false pretenses.

Debit card fraud

Debit cards are popular payment methods that are tied to the funds in your checking account. All debit cards have a customer service number on the back. This is the number you should call once a fraudulent charge is suspected. You can also visit a branch, but, for most banks, the banker will also have to call the number on the back of your card, which only adds a layer to the process.

In most cases, a new debit card will be issued when you report, but your bank account numbers will stay the same. While you wait for a new debit card, you'll have to visit a branch to make deposits or withdrawals and rely on online banking. Your bank account will still be active and able to process authorized transactions. Any Automated Clearing House (ACH) payments should continue to process normally while you wait for the new debit card. If your entire account was compromised, the bank may freeze your assets and issue a new account number.

One tip for avoiding debit card financial fraud is to be mindful when completing online transactions. Make sure you are on a secure site and not giving information to scammers. It is good practice to regularly monitor your account to ensure you are aware of transactions. When using your card online, be sure you aren't sharing any personal info such as your PIN number with a scammer.

Credit card fraud

To report a fraudulent charge on your credit card, you'll follow the same process outlined above. You'll need to call your credit card company as soon as possible and the number can be found on the back of your credit card. A credit card account can quickly be frozen, and a new replacement card can be sent to you to resume usage.

While you wait for a new credit card, be sure to check all the different merchants that you might have set up for payments with your credit card such as utilities, streaming services, or other subscription services. You'll need to update all online charges tied to your credit card with the new card information. That said, before you make those updates, audit the expenses that were formerly connected to in case there was a data or account breach. If you don't review those merchants, you may very well be adding your new credit card number to a compromised site - setting you up for additional fraudulent charges.

Wire transfer scams

A wire transfer typically involves high dollar amounts, and the funds are sent to the receiver almost immediately. This type of transaction is difficult to recover if fraudulent, which means scammers often target them as the most lucrative. Make sure you know who you are sending money to if doing a wire transfer. Verify information as much as possible before you finalize the transaction and don't rush any payment without completing a thorough review. Check and double check transfer account details in person, or on the phone with your receiver.

Bank account compromise

If your bank account is compromised by a scammer who obtained account numbers, the bank can freeze your account and reassign account numbers to keep your funds secure. Talk with your banker about how you can still access your money while you wait for new account information to be issued.

Withdrawing cash or purchasing gift cards for scammers

A financial institution will have a very difficult time helping you recoup any cash you withdraw and give to a scammer. Similar to a wire transfer, this is an immediate transaction the customer has to authorize, which tells the bank you are taking responsibility for the money you take out. Be very aware of the different ways scammers can try and get cash from you through text, phone, email or social media scams. Be vigilant and confirm the person asking you for money is legitimate before you decide to hand over cash.

The same can go for a gift card. If you purchase a gift card for a scammer, recouping the funds can be very difficult.

If you become victim of financial fraud, the first and most important thing to do is contact your financial institution or credit card company immediately. It is important to be mindful of the types of scams that can occur and how to keep yourself safe.

Quick tips to stay safe from financial fraud

1. Be cautious when using open and public WiFi networks. This is an easy way for scammers to gain access to your computer and your sensitive information. Some of them will create fake networks that look real and then they will steal your information. Be mindful if you are asked to provide credentials multiple times because then the WiFi network could be compromised. Instead, access the internet through a hotspot, which is more secure.
2. Run virus scans. Have your electronics checked regularly for any viruses to ensure your devices are safe and clear of malware.
3. Change passwords regularly. Best practice is to change passwords frequently to keep scammers guessing and to use a strong password that can't easily be identified or guessed by someone else. That means no pet names, no birthdays, no common vacation spots, etc.
4. Set up two-step authentication. Where possible, set up two-factor authentication for financial accounts. This added layer will make it harder for a scammer to gain access because two points of security are needed for access (for instance, your password and a security code sent to your email or phone). This can also quickly notify you if someone does try to gain access to your accounts. Fraudulent login attempts are monitored by many financial institutions and they can alert you if someone tries to gain access.

Additional types of fraud

Outside of financial fraud, someone can be victim of identify theft. If this happens to you, please contact Identifytheft.gov to see what steps need to be taken and how to monitor your credit.

Preventing future fraud

While recovering from financial fraud, be mindful that you don't fall for another scam or inadvertently give confidential information to another scammer. Never pay someone who says they can help you recover lost funds and never share personal information with anyone who asks without verifying their identity.

Be mindful that scammers can contact you by email, text, phone or social media if they know you are susceptible to scams. Remember, your financial institution will never call you to ask for personal information or money.

Fraud prevention

While there are different professional services that can monitor accounts for any fraudulent activities, it can be more effective to simply be in the habit of checking your accounts for fraudulent charges or suspicious activity. Online banking can be a great tool to quickly check your accounts on your phone or laptop (through a secure network, of course).

Fraud has become part of the financial experience, but you don't have to handle it along. Your financial institution is here to help if you are a victim of financial fraud, and to provide educational resources on fraud prevention. Be diligent about checking your accounts and verifying payment details and contact your financial institution as soon as you suspect fraudulent activity.

Protecting health and wealth - Explore tips for protecting your financial future through the Protecting Health and Wealth playlist on the UMB Financial Education Center.

Check the UMB Privacy and Security Center to learn more about risk-mitigation best practices and view security alerts.

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