For many Americans, making ends meet is a struggle made even harder by the COVID pandemic and its lingering effects. Unfortunately, this makes low-income people prime targets for “easy money” schemes — offers that seem to be a good deal but aren’t. Even if you feel short on choices, don’t become a victim to these bad ideas.
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“Donating” plasma can be helpful for people in need. For low-income Americans who have no choice but to literally sell their body, though, there are potential side effects, some that can be serious. Human blood is the 10th most valuable export in the United States, which goes to show how much large companies profit off low-income Americans.
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Payday loans charge exorbitant rates, ranging from 300% to 500% annual percentage rates or sometimes even higher. According to Pew, in most states, single-payment payday loans are common. “The large, unaffordable lump-sum payments required for these loans take up about a third of the typical borrower’s paycheck, which leads to repeated borrowing and, in turn, to consumers carrying debt for much longer than the advertised two-week loan term.”
Although not as bad as payday loans, high-interest credit cards still prey on low-income Americans. People with low credit scores or low income often find these are the only credit cards they can get. But the cards can charge interest rates of 30% or higher, and if not paid off monthly, the debt snowballs quickly.
Sales representatives often get a commission for getting you to sign up for store credit cards, sometimes by dangling tempting deals or interest-free periods. “They can afford to offer this discount today because they’ll make a lot of money off of you in the long run. Store cards have much higher interest rates than normal credit cards,” according to Credit.org.
Companies that offer high-interest auto loans are accused of intentionally providing loans they know consumers can’t afford. The proponents of these schemes then “squeeze as much money out of delinquent borrowers as possible,” according to lawsuits filed against lenders Santander and Credit Acceptance.
Winning the lottery is one of the oldest “easy money” schemes in the book. But the odds of winning the Powerball jackpot are around 1 in 302.5 million. At best you lose a few bucks; at worst you could become addicted and find your finances and life in shambles. You’re better off investing your money elsewhere.
As with the lottery, casinos try to make gambling seem like an easy way to strike it rich — which is even more problematic now that gambling online is an option. If you think you’re likely to get rich, think again. The real winners are always the casinos; together, the top 10 online casinos make $10 billion annually.
Everybody enjoys a good deal, especially a freebie. “Be careful when registering for free trials that are given online, because sometimes you'll be agreeing to a payment at a later time that you can't back out of,” says Retirement Being managing director Tyler Seeger. Even if you can cancel a free trial, you may forget to do it in time and find yourself caught again.
At worst, MLMs are illegal pyramid schemes; even at best they can take advantage not only on you, but your friends and family. Most people who join MLMs make little to no money, and may even lose some. “Pyramid schemes are scams. They can look remarkably like legitimate MLM business opportunities and often sell actual products, maybe even ones you've heard of. But if you become a distributor for a pyramid scheme, it can cost you and your recruits — often your family and friends — a lot of time and money that you won’t get back,” the Federal Trade Commission says.
For only a small “investment fee,” these companies promise lucrative work-at-home opportunities that can wind up costing you — an average $1,000 that the victims likely couldn’t afford to lose, according to the Better Business Bureau. These job scams are on the rise since the pandemic, too.
Personal finance bloggers are notorious for recommending completing surveys to “earn extra cash fast.” This is likely because most of these programs offer a generous affiliate program in which the referrer gets a financial kickback for everyone who signs up. The time spent completing surveys ends up earning you only a few dollars or even cents per hour spent, though. Legitimate part-time jobs will pay much better.
Ponzi schemes promise high returns on investment for little or no risk — but work by using money from new investors to pay returns to earlier investors rather than by actually investing the money. When fewer people invest, the scheme collapses and many investors lose their money, says Andrew Lokenauth, finance executive of Fluent in Finance and Finance Professor at the University of San Francisco. They are often illegal and can cause serious financial loss.
If getting an extremely high return on your money with little or no risk sounds too good to be true, that's because it is. High-Yield Investment Programs, which are considered internet-based Ponzi schemes, “are unregistered investments typically run by unlicensed individuals — and they are often frauds,” according to Investor.gov. Jack Hill, CEO of Debt Hammer, warns that HYIPs often have legitimate-looking websites and fancy marketing materials designed to lure in investors. “Just stay away from them,” he says.
There are many fake gurus out there who claim to be an expert in some online job and being able to teach you to be just as successful at it, making tons of money for the low, low price of several hundred (or thousand) dollars. “They often make more money selling courses than from their actual business,” say the creators of The Making of a Millionaire. While there are legitimate experts out there, it is important to research course creators to avoid falling victim to another scheme.
Many people have fallen victim to this scheme: Someone, often a stranger, asking you to deposit a cashier’s check and wire them the money. They usually make up some sort of excuse for why they can’t deposit the check themselves and say that for your trouble, they’ll let you keep 10%. Easiest money ever, right? Wrong. These checks are fake. You’ll soon find out from your bank that the check was bad and any money you wired to the scammer is gone forever.
There are some legitimate mystery shopping gigs out there; there are many more scams — so many that the Federal Trade Commission has put out advisories on how to avoid mystery shopping scams. To avoid being a victim, never work for a company that makes you pay to work or for a list of job opportunities. You should also never wire money or deposit checks, then send some back. If a job sounds too good to be true or guarantees you’ll make a ton of money, it is likely a scam.
Some people do make a lot of money day trading on the stock market, which is why so many more think it seems like a good idea. Make thousands of dollars for no work? Sounds appealing until you realize most day traders lose money. In fact, some studies show only 1% of day traders are profitable, while 97% not only make nothing but are in the red. For day trading, you stand to lose a lot on what is essentially a gamble.
Everyone enjoys winning a prize. Scammers take advantage of that by calling people with fake announcements of having won a prize or cash. “They ask you to pay money or give them your account information to get the prize. If you pay, you’ll lose your money and find out there is no prize,” the Federal Trade Commission warns.
The FTC also advises that there’s been an uptick in scams taking even more direct advantage of people struggling to make ends meet. One scam to look out for: Someone supposedly from the government calling to say they have awarded you a grant for unpaid bills. The government “won’t call, text, reach out through social media, or email you. In fact, real government grants require an application, are completely free to apply for, and are always for a specific purpose,” the FTC says.
Another scheme preying on low-income Americans has scammers pose as legitimate employers promising high returns if you just pay for a starter kit, certification, or training to begin. “Honest employers won’t ask you to pay to get a job,” the FTC says.
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