No one likes getting scammed. From ponzi schemes to phishing emails, people lose money each year to scams. People in the US lost almost $1.5 billion in 2018 to scams. These are the illegal scams, but what about the “legal scams”?
When I was in the 7th grade, some friends and I started buying baseball cards. I didn’t have that much money at the time from my lawn mowing jobs, but I spent it all on those cards hoping to get the good ones to sell back to make money and buy more. I am sure I spent a few hundred dollars, but I have no idea how much I really spent. This fall I sold all the cards (a few thousand of them) for $25. Did I get scammed 30 years ago?
I’ve been “scammed” a lot in my life. In my 20s, I was convinced to lease a vehicle, buy vehicles on payments, and use 0% transfer cards. In my 30s I bought penny stock because someone talked me into it. It’s worth nothing now. I’m using the word “scam” here in a slang definition of the word. In the proper sense of the word, “scam” refers to something illegal and deceptive. The slang sense of the word, it can refer to something that’s just deceptive.
I take full responsibility for my actions. Don’t get me wrong here. Some of it was reckless spending on my part and some I bought things intentionally that I wanted. Even though I take full responsibility for this, this doesn’t mean there wasn’t some deception going on by the baseball card dealer or the car dealerships or the credit card companies.
Credit Card Scams
The 0% interest credit card transfers are very deceptive. If banks did not make money on these schemes, they would not offer them. They get people to buy into the 0% interest offer, because they make it sound appealing. Banks know full well that many people will not get their debt paid off before the interest increases to 20% – 30%.
There’s also some fine print that they know most people won’t read. Some of the 0% transfers have a 3% transfer fee. Instead of putting the debt in your debt snowball and paying it off and possibly paying minimal interest if you got it paid off in a few months, you give the banks a guaranteed 3% interest. And then if you don’t get your credit card paid off before the 0% period is up, you pay another 20% – 30% on top of your transfer fee. They are being very deceptive. It’s a scam that you need to stay away from.
Mortgage Refinancing Scams
Another scam is refinancing your home and taking equity out. Mortgage companies want you to think this is free money for you. It’s not free money! Why don’t they try to get you to sell investments or take a loan from your retirement money to remodel your kitchen or pay off other debt? Why aren’t they trying to get you to borrow money against your stock that has increased over the years? They try to scam you by doing this with your house asset.
What’s their motive in this? Do they really care if you have a remodeled kitchen? They are being deceptive to get you to take on more debt so that you can give them more money in interest.
When trying to get you to refinance your mortgage, the banks try to sell you this by saying you can defer two months of mortgage payments. It sounds like more free money, but you still pay interest on those two months of mortgage payments for 15 or 30 years. It is very deceptive on their part, and it’s a scam.
30% of new vehicles are leased. We are told to lease a vehicle because of a business deduction. We are told to lease a vehicle because it’s the only way we can afford to have a new vehicle. Why buy a new vehicle when you can lease a vehicle and have a new one every two or three years?
Leasing a vehicle is one of the most expensive ways you can own a vehicle. There is always fine print, and the ads on TV and the radio are always deceptive. “Lease for $199 a month!” That’s after you pay the money due at signing and before you pay extra when you bring it back because you went over the lease miles and have some wear and tear after three years. It’s a scam that we keep falling for.
The dealerships don’t care if you have a vehicle or not. They’re in business to make money. They are not in business for your best interest, because if they were, they would try to get you to save up money and pay cash for a vehicle that you could afford.
Ultimately, each of us is responsible for our actions. These scams will always be out there because we all want the easy way of doing something. Want to remodel your kitchen? You can do it now by taking on more debt and don’t have to wait to save. Want to get free money? Click this button in the email. Want a car you cannot afford? Lease it. If you want to get rich overnight, you can send the Nigerian prince your bank account info.
You don’t get wealthy by taking shortcuts. Stop letting these lenders scam you. You build wealth by changing your behavior and by being intentional with your money. Build wealth by getting on a plan for your money. You won’t build wealth by getting scammed, whether by an illegal or a legally deceptive scam.