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Online trading scams

What online trading scams look like and how they work

The Set-Up

You see a must have bargain online. 

The Hook

The price is really too good to miss.

The Sting

The website is fake, you've handed over your money and your bargain is nowhere to be seen. Or you've signed up for a deal with hidden conditions.

How online trading scams work

Fake websites

It’s surprisingly easy to set up a real-looking website. To help draw you in, scammers often use names and website addresses that are similar to those of genuine retailers. For added credibility, they sometimes advertise in genuine online directories and on social networking sites. Or they may pay to be in search engines' featured listings.

Fake business pages on social media sites like facebook can also be used to draw people into scams.

Read more about social media scams

Asking for more money

Some scammers advertise fake products then ask for even more money after you've paid. They claim to need extra payments for things like shipping, taxes and insurance.

As the original price seemed so low, you could be tempted to send the extra money. Don't. They'll keep  coming up with reasons why they need more money. And for goods that didn't exist in the first place.

Scammers on genuine auction websites

Reputable auction sites have systems to spot scams. So scammers will often try to take you away from auction sites to do a deal. Be wary if anyone asks you for a private sale. Whether that's for one of their listings or something that you've listed.

Sending too much money

Alarm bells should also ring if the person who wins your  auction sends you too much money when it comes to pay. This is a type of Upfront Payment scam. The scammer will claim that they have made a mistake. They will ask you to send them a refund. Or they may ask you to forward money onto sombody else. Either way you'll find that their transaction is reversed and you end up minus funds.

Read more about Upfront Payment Scams

Penny auction websites

Penny auctions are a twist on online auctions. In a penny auction you pay to take part. Each bid increases the price by one or two cents so, in theory, you can buy sought after goods like iPads and digital cameras for a fraction of their retail price.

But there's a catch. You may agree to hefty membership fees without realising. Some penny auction sites start deducting fees once they have your credit card details. When you try to cancel they ask for further payment and photocopies of your credit card and passport. This leaves you not only out of pocket but open to identity fraud.

Fake tickets

Scammers take advantage of major events like rugby games and music gigs. It's safer to buy tickets from authorised ticketing outlets.

Protect yourself from online trading scams

  • Before buying online, it's a good idea to do your homework. Type in the company's name, followed by the word 'scam'. If the website is fake, you may uncover stories from people who've been caught out by the same scam.
  • Remember that comments about a company or product that seem too good to be true may be just that. It's very easy for scammer to write their own glowing reviews.
  • It's safer to pay by credit card than doing a bank transfer. If things go wrong, you may be able to get a chargeback. Be especially wary of sites that ask you to pay using a money wiring service such as Western Union.
  • Check that payment pages look secure. Look for a padlock symbol and make sure the website address begins with ‘https’ (the 's' stands for secure).
  • Always check out traders' contact details. Be on your guard if they only give you an email address or mobile number. If they provide a landline number, ring it. If you can't get through, or you're diverted to somebody in an overseas call centre, it may be a scam. Also be wary if the only address they give is a PO Box number.
  • Don't assume that a company is based in New Zealand just because the website address ends .co.nz. You can check to see if a company is registered in New Zealand at www.business.govt.nz/companies.
  • Always read terms and conditions attached to any offer. Look for hidden costs and obligations. Don't trust offers that don't allow you to read the terms and conditions.
  • When trading on auction sites take into account the ratings given to buyers and sellers.
  • Resist suggestions to go outside the auction process to complete the sale.
  • Also be wary of sellers who demand immediate payment. Or payment that gives you no way to retract or cancel. Electronic funds transfer and money wiring services like Western Union are a good example.

Help protect others from online trading scams

If you've been affected by an online trading scam, help us to warn others by sharing your story. Your personal details will be treated in strictest confidence.

Report your scam here.

Last updated 23 November 2012