Avoiding scams: Know your rights when it comes to payment types

One of the more common scamming tactics you've likely heard about is with gift cards. Today we're showing you how to recover from such scams.

JACKSONVILLE, Fla. – You bought something online, and the seller wants you to pay through CashApp. Is that okay? You got a new job, and your new employer sends you a check – for more than your salary. Is it okay to deposit? Your water bill is overdue and the “utility company” demands payment through a pre-paid debit card. Is that a problem? In all three cases, it’s a scam!

Knowing the ins and outs of payment types is one of the best ways to spot a scam. Peer-to-peer (P2P) payment apps, such as Zelle, CashApp, and Venmo, are becoming increasingly popular. But digital wallets aren’t the only way to transfer funds without using a debit or credit card. Checks, prepaid debit cards, and gift cards can all transfer money from one person to another.

How safe are these payment methods? And when should you use or avoid them? BBB offers the following advice to help you understand how each payment method works, make payments safely and avoid falling victim to scams.

P2P Payment Apps

  • Know how P2P payment apps work. P2P payment apps allow users to send money to each other using a mobile app, usually as a smartphone app. To use a P2P payment app, you must first set up an account, after which you can link your bank account directly or a credit or debit card to provide the funds sent to other users. Once your account is set up, you can search for other users with phone numbers, usernames, or emails. Sending money is relatively easy. You simply choose the recipient, select an amount, designate the reason for the payment if you wish, then submit the payment. Depending on the app and your payment method, it can take anywhere from a few seconds to a few business days to complete the transaction.
  • Know your rights. Unlike traditional banking systems, most P2P apps won’t cover your funds in case of fraud. If you sent money to a scammer and later realize your error, it’s unlikely you’ll have any success getting the company to reimburse you. The best way to protect yourself from scammers is to think carefully about who you send money to using this payment method.
  • Use P2P payment apps wisely. Keep in mind that some digital wallet apps take a few days to process a transaction. Scammers take advantage of the system to “send funds” that they know will never go through. Get to know other digital wallet scam tactics too, so you’ll be quick to notice when something is fishy. Avoid businesses or individual sellers who only allow you to pay with P2P payment apps. Instead, use these apps to transfer funds to your friends, family, and other people you already know and trust. Link your credit card (instead of your debit card or bank account) for an added layer of protection and enable any additional security settings the app offers, like multi-factor authentication. If you need tech support or assistance, double check you are calling or visiting the website of the official company, not an impostor’s hotline.


  • Know how checks work. Federal banking rules require banks to make the funds available within a day or two when someone deposits a check. The problem is, funds may not truly be transferred from the payer’s account for several business days. If it turns out the check is a fake or if it bounces, the bank has the right to recover the amount they deposited into your account. Cashier’s checks are checks guaranteed by a bank, not an account holder, while money orders are generally prepaid by a person or business. Both are treated as guaranteed funds, but it’s important to make sure they are legitimate, as scammers are skilled at forging them.
  • Know your rights. If a check is suspicious the bank may put a hold on it before crediting your account. However, if the check passes inspection, your bank will credit your account in the amount written on the check. The check must then go from your bank to a clearinghouse and from there, to the bank where it originated from. Because there are several parties involved, it can take up to two weeks to determine if a check is legitimate. If you spend the money the bank credited to your account in the meantime and it turns out the check was a fake, you’ll be responsible for returning the funds. If the fraudulent check appears to come from a specific company, the company will not be held liable as long as they didn’t know about the fraud.
  • Use checks wisely. If a stranger sends you a check, cashier’s check, or money order, think twice before you deposit it and use the funds. Some scammers send checks for large amounts and ask you to return part of the funds via wire transfers or prepaid debit cards. This is a scam! Unless you already know and trust the person or company who sent you the check, always wait for the funds to clear before you spend the money. Look carefully at any check you receive, keeping an eye out for misspellings, flimsy or suspicious check paper, and missing routing numbers or MICR codes. All of these are red flags for a fake check. Make sure the payer is who you would expect it to be, too. If someone claims you’ve won the lottery, for example, the check should come from the state lottery commission, not a private company. Review this BBB study for more ways to avoid falling victim to check scams.

Prepaid Debit Cards

  • Know how prepaid debit cards work. Prepaid debit cards function like a regular debit card, and you can use them at ATMs. Prepaid debit cards may cost a few dollars to buy, but are reloadable. They may also come with periodic fees that can subtract from the balance.
  • Know your rights. According to Consumer Reports, some reloadable prepaid cards may offer some protection against fraud loss if you report unauthorized use within two days of discovering it. That said, liability is generally limited to $50. If you load a prepaid debit card and send the card numbers to a scammer as a form of payment, they will likely withdraw all the cash from an ATM and then try to stall you by explaining a supposed delay the delivery of their product or service. By the time you realize what’s happened, you may have no legal recourse to get your money back and no way to identify the scammer. Keep in mind that The FTC’s Telemarketing Sales Rule (TSR) prohibits several payment methods in telemarketing transactions in the U.S., including reloadable prepaid cards. Of course, this rule may not stop a scammer from asking you to pay this way.
  • Use prepaid debit wisely. Don’t trust any company or individual that demands payment with a prepaid debit card. Legitimate business transactions should allow you to use other payment methods. Prepaid debit cards are a good way to give a gift or help your teenager learn about money management, but they are not a good way to pay for services or products.

Gift Cards

  • Know how gift cards work. Closed loop gift cards can only be used at a specific store or chain of stores. Open loop gift cards are valid at most retail locations. To use a gift card, you must first load funds onto the card via another payment method. Once the funds are loaded, you may need to activate the card and create a PIN to use it in-store.
  • Know your rights. It’s wise to hold on to the gift card and save your receipt after you purchase and activate it. If any issue comes up later, the company will want proof that you are the one who purchased and activated the card. That said, providing someone with the numbers on the back of a gift card is just like sending them cash. Gift cards don’t offer the same protection as a credit card or debit card, and it’s nearly impossible to get your money back if you send the numbers to someone who turns out to be a scammer.
  • Use gift cards wisely. Never do business with anyone who insists on payment with gift cards. It’s a scam! Before you buy a gift card, make sure it hasn’t been tampered with. Some scammers steal the numbers while a card is still in the store, so they can access the funds as soon as the card is activated. It’s best to use gift cards for their intended purpose, as gifts for friends, family, or others you know and trust. Read this BBB gift card study to find out more about gift cards and related scams.

Learn how to spot more scams on BBB.org/spot-a-scam.