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Your Guide to Cash Advance Scams

Andrew Tavin, CFEI
Andrew Tavin is a personal finance writer who covered budgeting with expertise in building credit and saving for OppU. His work has been cited by Wikipedia, Crunchbase, and Hacker News, and he is a Certified Financial Education Instructor through the National Financial Educators Council.
Read time: 4 min
Updated on September 20, 2022
woman with curly hair and glasses looking at a guide to cash advance scams
Don't give out your personal information and watch out for excessive upfront fees or collectors calling about debts you've already paid.

It’s a new year and we’ve got a new resolution for you: don’t get scammed. This year, be on the look out for the “cash advance” scam. This can mean a lot of different things, so we’ll give you a brief tour of the scummy underbelly of cash advance scams so you can recognize the warning signs.

Wait, what is a cash advance?

Before we get into cash advance scams, let's talk about cash advance loans, which can take many forms. At the most narrow, accurate, and specific level, a cash advance loan is a cash loan you take out using your credit card. It has to be within your credit limit and it often comes with fees and not insignificant interest.

(Plus, with a cash advance, there's no grace period on interest like there is with a regular credit card purchase. You start accruing that "not insignificant" interest the second the advance is made. For all the details, check out the OppU post What is a Cash Advance?)

Big upfront fees.

Another, similar, kind of cash advance scam is charging you a large upfront fee to get the loan. You’re trying to get money, so why should you be giving them money?!

And of course, just because they’re charging you an exorbitant upfront fee doesn’t mean they won’t charge you other exorbitant fees afterward.

Beware who is on the other line.

You’re at home eating dinner when suddenly you get a call. Could it be a friend of yours? NO. It’s someone calling to offer you a cash advance loan. Don’t do it. Just hang up. You probably hang up on telemarketers anyway, but now you can do so with the knowledge that they might have been trying to scam you.

If you've applied for a loan from somewhere and they call about your application, that's fine. Maybe you don't want them disturbing you at dinner, but at least they're calling for a good reason.

Don't trust people who contact you online either.

Don't worry, you can definitely find a good online loan, but you should do your homework on all the lenders out there and look at their reviews to make sure you don’t get taken advantage of. We’ve covered what to look out for a few times before.

And if someone tries to offer you a cash advance in an email? Don't click on any of the links, don't even open the message. They might be trying to hack into your computer through a process called "phishing."

Watch out for fake debt collectors.

Last year, the Washington State Department of Financial Institutions released a warning about various entities using the name “cash advance” to carry out a phone scam. The caller will claim that they are collecting on a cash advance loan and require payment. They’ll then become belligerent and demand your payment information, threatening to seize your assets if you don’t comply. Other threats might include legal action, wage garnishment, or even arrest.

A situation like that can be can be scary, even if you know for a fact that you don't have any overdue bills or collections notices against you. And the most important thing you can do when receiving one of these calls is to stand your ground. No matter how much they threaten you, do not give in.

Thankfully, the Better Business Bureau has a list of actions to take if you receive a cash advance collection scam call:

  • Just hang up: If you don't have any outstanding loans, hang up. Don't press any numbers or speak to an ‘agent.'
  • "Ask the debt collector to provide official ‘validation notice’ of the debt. In the U.S. and most of Canada, debt collectors are required by law to provide information in writing. The notice must include the amount of the debt, the name of the creditor and a statement of your rights. If the self-proclaimed collector won't provide the information, hang up.
  • "Ask the caller for his/her name, company, street address, and telephone number. Then, confirm that the collection agency is real.
  • "Do not provide or confirm bank account, credit card, or other personal information over the phone until you have verified the call.
  • "Check your credit report. In the US, check with one of the three national credit reporting companies (Equifax, TransUnion, Experian). In Canada, check with Equifax Canada. This will help you determine if you have outstanding debts or if there has been suspicious activity.
  • "Place a fraud alert on your credit report. If the scammer has personal information, place a fraud alert with the three national credit reporting companies.”

Follow all of these steps, and you’ll be a scam-stopping machine!

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