Don’t count on your bank to replace your money if you’ve been taken by a scam. It all depends on the bank’s investigation of how the money was removed. And most major banks are taking a tough line on reimbursements these days.

So if you were scammed into giving out your PIN or transferring money, the odds are you’re out of luck.

The key difference between a fraud and a scam is whether you authorized the payment. You can authorize a payment by sharing your password or the one-time passcode a bank sends, or by sending a wire or check.
Fraud is when someone uses your account without your authorization.

Americans lost nearly $9 billion to fraud and scams in 2022. About one-quarter of those losses came when someone impersonates a trusted person or institution to get you to send money by pretending to be from the IRS or even a bank’s fraud department and demanding you send money immediately. Or they can make voice-altered requests to elders pretending to be their grandchild being detained in jail until you can send the “bail.”

It’s not only the elderly, who may not be tech savvy, that become victims. In our busy world, far too many people click on a text authorization that leads to fraud. Banks now routinely demand your confirmation before large transfers to unknown payees are made. Pay attention.

Payment systems like Paypal, have their own guidelines—but these too are based on withdrawals from your bank account or payments on your credit card. Once money is withdrawn it’s almost impossible to get it back. Zelle is a “closed-loop” of banks, which makes it easier for the receiving bank to lock up the fraudulently transferred money, but only if you catch and report it quickly.

Credit cards have a zero-liability protection policy in most cases for purchases customers didn’t make, but it can take more than 90 days for them to investigate a dispute and decide whether to return your money. Debit cards, which are tied to checking accounts, also have similar protection – but ultimately the return policy depends on the bank and its investigation.

Adding insult to injury, since the passage of the 2017 tax law, you can no longer deduct fraud losses from income! The only deductible losses come when a Federal disaster declaration has been declared, typically after a natural calamity.

What to Do to Prevent Fraud

• Slow down. Crooks rely on consumers being in a hurry and clicking on texts or emails authorizing purchases.

• Monitor your bank account and credit card balances securely online—at least once a week, and more frequently if you’re active online.

• Create a two-factor authentication system for your major accounts, so that any withdrawals or charges cannot be completed simply by using your password, but require you to confirm separately.

• Change your passwords annually and create a separate password for each financial site you use. If someone gets into your social media or news outlets, there’s little potential damage to your finances. But bank and credit card passwords are a direct artery to your financial well-being. Also, save all your passwords in a password management program like Dashlane.

• If someone saying they’re from your bank, ask for their name and tell them you will call them back at the number on the back of your credit or debit card.