For every legitimate opportunity out there, there’s always going to be someone who takes advantage of it. There will always be scams. Therefore, you have to stay on the lookout to make sure that anything you get involved with is the real deal. For example, if you want to get involved with a savings club, then you need to make sure that you know how to spot a savings club scam.
What Is a Savings Club?
You’re browsing online and see an invitation to join a savings club. Sometimes they’re called giving circles. Alternatively, they may be known as a “susu” or “sousou.”
The concept is fairly simple:
- A group of people each contribute regularly to a communal fund
- You each take turns withdrawing money from the fund
That’s it. It’s essentially a communal savings account. Basically, this allows you to have access to large sums of money for times when you need to make big purchases. It sounds great. So how do you spot a savings club scam?
What Is a Savings Club Scam?
A savings club scam takes the basic idea of the savings club but distorts it. In this version, you’re encouraged to invite additional people to join the savings club. Moreover, they tell you that you can earn interest or withdraw more money than you put in. Obviously, if you withdraw more money than you put into savings, you run out of money. That’s why you need those new people to keep joining and adding more money to the account. In other words, a savings club scam is basically a pyramid scheme.
Tips to Spot a Savings Club Scam
Here are some of the most common tips to spot a savings club scam:
- If someone you don’t know invites you to a savings club, be wary.
- Any savings club that offers interest on your contributions is likely to be a scam.
- If you are asked to recruit other people to join the club, then it’s most likely a scam.
Additional Advice to Avoid Scams
Here are some additional tips to spot a savings club scam as well as other scams that you might encounter online:
- Search online for the name of the offer and the word “scam”. For example, if you see an offer to join a money game like The Blessing Loom, then do a search for The Blessing Loom scam. You’ll immediately see that there are many warnings against this.
- Do a Better Business Bureau search.
- Always read the fine print. Make sure you understand the details of what you’re getting involved with.
- Explore comparable options. For example, look into various savings and loan options that meet the same needs as a savings club. If you find a better option, then it can help to point out whether or not the original offer is a scam.
- Finally, if it sounds too good to be true then it probably is.
If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.
Check out these helpful tools to help you save more. For investing advice, visit The Motley Fool.