During the worst months of the coronavirus pandemic of 2020, Americans who heeded social distancing and isolation measures became more interested in online banking. Many individuals found that their banks did not provide a satisfactory online experience, thus prompting them to shop around for other options. In some cases, however, some of these individuals fell prey to internet scammers who dangled offers that caught the attention of compound interest investors.
Cybercrimes and Fraudulent Entities
Banks that only do business on the internet tend to offer better interest rates on their savings accounts and certificates of deposit; they are able to do this because they do not have the overhead expenses of operating physical branches. Sophisticated cybercrime organizations know that fans of compounding are always on the lookout for financial instruments that can help them increase the yield on their investments; to this effect, there has been a sharp increase in the number of fraudulent websites masquerading as online-only banks.
there has been a sharp increase in the number of fraudulent websites
The American Banking Association estimates that losses related to bank fraud amount to more than $25 billion each year. Look-alike websites and banks that do not exist in the first place are a major part of this problem; fraudsters are known to use false advertising in order to promote CDs and high-yield savings accounts that ostensibly pay interest rates as high as 5%. Some of these fake websites are set up for identity theft, while others serve to trick investors into wiring funds or sending checks.
Beware Too Good to be True
Spotting some of these scams is a matter of being aware of market conditions. With a battered economy, the fed funds rate in the U.S. has fallen to 0.25%; based on this, it would be pretty hard to believe a bank that is offering high-yield savings accounts paying interest rates higher than 0.9%. Even a five-year jumbo certificate of deposit would not offer such high rates; doing so would bring major losses to banks.
Any U.S. bank website you find online can be vetted through the online BankFind tool provided by the Federal Deposit Insurance Corporation. If the bank is using a landing page that has not been registered, you can call the FDIC at 877-275-3342 for verification.