Top tips on how to spot a scam – and avoid being ripped off

Before you accept an offer that looks too good to be true, examine the facts, says James Daley

In 1588, a number of Spaniards found themselves the victims of a clever confidence trickster, who claimed he was raising money to secure the bail for a wealthy businessman in a local jail.

The con artist would tell each of his targets that if they helped put up the necessary ransom, they would not only be rewarded with great riches, but would also be given the hand in marriage of the wealthy businessman's beautiful daughter. As soon as the money had been handed over the trickster would disappear, never to be seen again.

Four hundred and 20 years later, and very similar scams are still catching out thousands of people a month. Today, however, the sums at stake are considerably larger, with an estimated £3.5bn being lost every year in the UK alone, according to the Office of Fair Trading.

Here, we look at the most common cons, and give some tips on how to spot them. The golden rule for avoiding the tricksters, however, remains exactly the same today as it was four centuries ago. If an offer sounds too good to be true, it almost certainly is.



Holiday clubs

Bogus holiday clubs robbed Brits of more than £1.1bn last year – this is the most common con around. The clubs usually target holidaymakers when they're overseas, handing them scratch cards in the street which tell them that they've won a "free" prize.

To collect it, all they have to do is go along to a presentation, where they are told that they have been given membership to an exclusive holiday club, granting them free stays at top-class resorts all over the world.

Victims are then usually put under pressure to pay some kind of fee to complete their membership or will be forced to pay hundreds of pounds worth of extras if they ever take advantage of the holidays.

Many of these holiday clubs are good at presenting a professional front. But any holidays you eventually go on are likely to be to resorts you didn't want to visit, and will cost a lot more than you would have paid if you'd booked independently.

Top tip: don't trust free scratch cards. Unless you're buying an official lottery scratch card at your local newsagent, the "prize" you have won probably doesn't exist.



Golden investment opportunities

You get a call or letter from a stock broker claiming to have a little-known exciting investment opportunity for you. The returns are set to be astronomical, and the salesman will tell you that you can't lose.

However, once you've parted with your cash, you're likely to discover that your investment is in an unquoted company, and that your shares are impossible to sell on – rendering them worthless.

These scams often seem to have an element of legitimacy, as the buyer can hear the salesman in a busy call centre. Usually, however, the broker is overseas, and the other voices are all pitching similarly dodgy investment deals to other would-be victims. These are often known as "Boiler Room" scams, and cost consumers almost £500m a year.

Top tip: Check if the salesman is regulated by the Financial Services Authority. You can find out by visiting www.fsa.gov.uk/register.



Foreign lotteries

These tend to work by sending out letters claiming that you've won a lottery overseas – perhaps in Canada – and that you merely need to send an administration fee to receive your prize. This can be as little as £5, but is often much more.

Alternatively, you may be asked to call a telephone number beginning with 09 to claim your prize, but these will charge you more than £1 a minute and will keep you hanging on the line for hours at a time. If you ever get through and are sent a prize, it will be worth much less than you spent on your phone call. More often, victims walk away with nothing.

Around 140,000 people fell victim to this ruse last year, losing a total of £260m. The average loss was a massive £1,900 per victim, although the median loss was a more modest £42.

Top tip: Never call 09 numbers to claim a "prize" – it's a sure sign of a scam. If you've really won a prize, you shouldn't have to pay any administration fee.



Pyramid schemes

Pyramid schemes have been around for decades, but are still as popular as ever, robbing their victims of an estimated £420m a year. They work by asking people to pay to become a member, but promising them a quick return on their money if they recruit a number of new members to the scheme.

The members may be allowed to keep a fraction of the fees which are raised from any new recruit, with the rest of the money being passed on up the pyramid. Those at the bottom, however, are most exposed, and won't receive anything if they can't keep signing up new recruits.

Eventually, the scheme gets too big and collapses, leaving all but a few of those at the top of the pyramid completely out of pocket.

Top tip: Avoid schemes that depend on you signing up new members.



Letters predicting the future

These are now the most common direct-mail scams – letters purporting to be from psychics or clairvoyants. The letters will claim that the psychic has knowledge about you which will change your life forever, and may even warn you that you could be in danger if you do not respond to the mailshot.

Typically, recipients are asked to send money to reveal the predictions. Worse still, those who reply are usually added to a "sucker" list, and find they are then targeted by dozens of more scams. Some £40m a year is being lost to these scams.

Top tip: Stop junk mail by registering with the Mailing Preference Service (www.mpsonline.org.uk).



Miracle Health cures

These schemes claim to offer a miracle cure for various illnesses – everything from cancer to impotence to multiple sclerosis.

To appear genuine, they will often include a number of bogus testimonials, proclaiming how successful the product proved, but in reality they are worthless. Most have not been medically tested, and some are even dangerous.

Britons lost some £20m to these scams last year – at an average of £90 a time.

Top tip: ask your doctor before taking any pills you're not familiar with.



Foreign money offers

This is the scam most like the original Spanish prisoner trick. Victims are usually contacted by email or fax by someone purporting to be an African government official or wealthy businessman, who claims to need help transferring a large sum of money to the UK. In return for providing your bank account as a haven for the money, you're told you'll be given a hefty commission.

However, once the fraudsters have got hold of your bank account details, and persuaded you to part with other sensitive financial information, they'll do their best to clean out your account. Alternatively, they may ask you to provide some cash in advance to pay a "transfer fee" – money you'll never see again.

Top tip: Don't reply to emails from strangers.



Mobile phone scams

It's increasingly common to receive text messages telling you that you've won a prize, and all you need to do is reply to the text or call a certain number to claim it. However, these texts and calls are often premium rate and will cost you more than £1 a minute, or £1 per text.

Another recent trick is executed by calling people's phones from 070 numbers, and hanging up immediately. The phone owner sees the missed call, and because it begins 07, they call it back believing it to be a mobile. However, 070 numbers are actually personal forwarding numbers, and can be charged at several pounds a minute if you call them back from a mobile.

Top tip: If you don't recognise a missed-call number on your phone, don't call it back. If it's important, they'll leave a message.

Other popular scams

A popular scam involves email communications offering you free gifts such as iPods and games consoles in return for spending a small amount of money, say £20, on another product. Whatever you buy will not be worth anything like what you pay for it, while the free gift is unlikely to ever arrive.

Another frequently occurring con is the working-from-home scam – these are adverts or flyers which claim you could earn hundreds of pounds a week. These schemes often require you to send off a fee to get started, after which you'll never hear from the company again.

Similarly, bogus loan adverts may require you to send off a fee for insurance before they hand out the money – but will then disappear. For details on other scams, visit the Office of Fair Trading's website, www.oft.gov.uk/oft_at_work/consumer_initiatives/scams.



What to do if you are a victim

In most cases, there's not much chance of recovering your money if you're caught out by a scam. However, if you suspect that you are being tricked or that you've already been the victim of a scam, it's still important to report it, so that the authorities can work towards preventing other people being caught out.

Most scams can be reported on the Consumer Direct website at secure.consumerdirect.gov.uk/reportascam.aspx, but in the case of investment scams, you should contact the Financial Services Authority at www.moneymadeclear.fsa.gov.uk/contactus.aspx, or call 0845 606 1234.

Ten questions worth asking

* Was the offer unsolicited?

* Does it look too good to be true?

* Can you verify the identity of the email or phone call?

* Do I have to respond "at once" – what's the rush?

* Do I have to make a purchase to win a prize?

* Do I have to call a premium-rate telephone number?

* Do I have to give my bank or credit card details?

* Do I have to send the money to a PO Box number?

* Am I asked to keep it confidential?

* Can I afford to lose the money?

'I was cheated out of £3,000'

Graham Allison, 66, a retired security guard from Essex, fell victim to a racing tip scam two years ago, which promised to make him a millionaire in less than a year. For £3,000, the company said it would provide Graham with a series of dead-cert racing tips and, better still, offered a money-back guarantee if it did not deliver on its promises.

"He gave me one winner," he says. "But it was at 8-13. After that it dried up, and eventually I decided that it wasn't working and asked for my money back. I never heard from them again."

In the years since, Graham has been inundated with offers of similar schemes in the mail, receiving more than 20 in the last month alone – and suspects his name has been put on a "suckers" list used by scammers.

"I'd say to anyone that's thinking of signing up to these kind of schemes – don't be fooled," he says. "Don't give any of your hard-earned money away.

"We're lucky. We can keep our heads above water because my wife's still working. But many people they target do not have any money. If I can save just one or two people by talking about my experience, I'd be happy."

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
The Banksy image in Folkestone before it was vandalised
people
Life and Style
tech

Sales of the tablet are set to fall again, say analysts

Sport
football West Brom vs Man Utd match report: Blind grabs point, but away form a problem for Van Gaal
Arts and Entertainment
Gotham is coming to UK shores this autumn
tvGotham, episode 2, review
PROMOTED VIDEO
News
i100
Arts and Entertainment
Bloom Time: Mira Sorvino
tvMira Sorvino on leaving movie roles for 'The Intruders'
News
First woman: Valentina Tereshkova
peopleNASA guinea pig Kate Greene thinks it might fly
News
Brian Harvey turned up at Downing Street today demanding to speak to the Prime Minister
news

Met Police confirm there was a 'minor disturbance' and that no-one was arrested

Arts and Entertainment
George Lucas poses with a group of Star Wars-inspired Disney characters at Disney's Hollywood Studios in 2010
films

George Lucas criticises the major Hollywood film studios

Voices
Chris Grayling, Justice Secretary: 'There are pressures which we are facing but there is not a crisis'
voices

Does Chris Grayling realise what a vague concept he is dealing with?

Life and Style
A street vendor in Mexico City sells Dorilocos, which are topped with carrot, jimaca, cucumber, peanuts, pork rinds, spices and hot sauce
food + drink

Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets

Life and Style
The charity Sands reports that 11 babies are stillborn everyday in the UK
lifeEleven babies are stillborn every day in the UK, yet no one speaks about this silent tragedy
News
Blackpool is expected to become one of the first places to introduce the Government’s controversial new Public Space Protection Orders (PSPOs)
news

Parties threaten resort's image as a family destination

Life and Style
Northern soul mecca the Wigan Casino
fashionGone are the punks, casuals, new romantics, ravers, skaters, crusties. Now all kids look the same
Life and Style
gaming

I Am Bread could actually be a challenging and nuanced title

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Customer Service Executive / Inbound Customer Service Agent

    £18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...

    ASP.NET Web Developer / .NET Developer

    £60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....

    Operational Risk Manager - Asset Management

    £60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

    Project Coordinator - 12 month contract

    £27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...

    Day In a Page

    Two super-sized ships have cruised into British waters, but how big can these behemoths get?

    Super-sized ships: How big can they get?

    Two of the largest vessels in the world cruised into UK waters last week
    British doctors on brink of 'cure' for paralysis with spinal cord treatment

    British doctors on brink of cure for paralysis

    Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
    Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

    Salisbury ranked seventh in world’s best tourist cities

    The city is home to one of the four surviving copies of the Magna Carta, along with the world’s oldest mechanical clock
    Let's talk about loss

    We need to talk about loss

    Secrecy and silence surround stillbirth
    Will there be an all-female mission to Mars?

    Will there be an all-female mission to Mars?

    Women may be better suited to space travel than men are
    Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

    'They poured water on, then electrified me...'

    If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
    James Wharton: The former Guard now fighting discrimination against gay soldiers

    The former Guard now fighting discrimination against gay soldiers

    Life after the Army has brought new battles for the LGBT activist James Wharton
    Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

    Panic over Ebola threatens to infect the midterms

    Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
    Premier League coaches join the RSC to swap the tricks of their trades

    Darling, you were fabulous! But offside...

    Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
    How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

    How to dress with authority

    Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
    New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

    New book on Ian Curtis sheds fresh light on the life of the late singer

    'Joy Division were making art... Ian was for real' says author Jon Savage
    Sean Harris: A rare interview with British acting's secret weapon

    Sean Harris: A rare interview with British acting's secret weapon

    The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
    Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

    Tim Minchin interview

    For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
    Boris Johnson's boozing won't win the puritan vote

    Boris's boozing won't win the puritan vote

    Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
    Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

    Tim Wheeler: Alzheimer's, memories and my dad

    Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album