Money Traps to Avoid
What it is
Section titled “What it is”Spotting traps aimed at people new to money — payday loans, rent-to-own, “be your own boss” schemes (MLMs), and scams.
Why it helps you
Section titled “Why it helps you”People who prey on others look for those who are new and alone. Knowing the traps keeps your money yours.
This opens up
Section titled “This opens up”Confidence with money and with people.
Where to get help
Section titled “Where to get help”Report a scam or unfair business
Section titled “Report a scam or unfair business”ReportFraud.ftc.gov The Federal Trade Commission (FTC) collects reports about scams and bad business practices. This includes fake “business opportunities,” and companies that won’t let you cancel. Your report helps them go after the people behind it.
- Cost: Free
- Who can use it: Anyone
- How to start: Go to the website and click “Report Now.” Or call 1-877-382-4357.
- Good to know: The FTC can’t solve your case one-on-one. After you report, it shows you next steps to protect yourself.
CFPB complaint The Consumer Financial Protection Bureau (CFPB) takes complaints about payday loans, debt collectors, banks, and other money companies. It sends your complaint to the company for a response.
- Cost: Free
- Who can use it: Anyone
- How to start: File online, or call 1-855-411-2372, Monday to Friday, 9 a.m. to 6 p.m. Eastern Time.
- Good to know: Write down dates, amounts, and who you talked to. Keep copies of papers.
State consumer protection offices (USA.gov) A list of each state’s consumer protection office. These offices handle complaints about local businesses and can sometimes help settle a dispute.
- Cost: Free
- Who can use it: Anyone. Pick the state where you live or where the business is.
- How to start: Choose your state from the list. Follow the link to that office’s complaint form.
- Good to know: Each state’s office works a little differently.
Find a safer way to borrow or get help
Section titled “Find a safer way to borrow or get help”Payday Alternative Loans (MyCreditUnion.gov) A government page about small loans from federal credit unions. These “PALs” cost far less than payday loans. Their interest rate is capped at 28% a year, and the application fee at $20.
- Cost: Free to read. The loans have a capped rate and fee.
- Who can use it: Usually members who have been with the credit union at least one month
- How to start: Join a credit union now, before you need a loan (see A Bank Account). Then ask, “Do you offer payday alternative loans?”
- Good to know: Not every credit union offers them.
LawHelp.org A guide to free legal aid in your state, run with nonprofit legal aid groups. Use it if a payday lender, debt collector, or rent-to-own store is threatening you, or if you’ve been sued.
- Cost: Free information. Free lawyers are usually for people with low income.
- Who can use it: Anyone can read the guides
- How to start: Pick your state. Look for “Consumer” or “Debt.”
- Good to know: If you get court papers, don’t ignore them. Call legal aid right away.
Multi-level marketing and pyramid schemes (FTC) A plain guide to “be your own boss” offers where you sell products and recruit others. The FTC says most people who join make little or no money, and some lose money.
- Cost: Free
- Who can use it: Anyone
- How to start: Read it before you join anything that asks you to buy products or recruit friends.
- Good to know: It lists questions to ask before you sign up.
If you only do one thing first
Section titled “If you only do one thing first”Join a credit union now, while things are calm. Then, if you are ever short on cash, you can ask them first. That’s much safer than a payday loan or a check-cashing store.
Watch out for
Section titled “Watch out for”- Payday loans and car title loans. They are easy to get and very hard to pay off. The fees can make you borrow again and again. Ask a credit union about a payday alternative loan instead.
- Cash advance apps. Apps that pay you early often charge “fast” fees and ask for “tips.” For a loan of a few days, that can cost a lot.
- Rent-to-own stores. Low weekly payments can add up to much more than the store price. Multiply the payment by the number of weeks before you sign.
- “Be your own boss” groups. Watch out if a new friend pushes you to buy products and recruit people you know. Be extra careful if they pressure you or tell you to stay away from people who doubt it. It can feel like the group you left.
- Free trials that need your card. They may charge you every month after the trial ends. See Shopping Smart.
- Anyone who asks for gift cards, wire transfers, or crypto. Real businesses and government offices don’t ask you to pay this way. It’s a scam.