NerdWallet's Smart Money Podcast - Money Scams, and Renting Credit Card Tradelines for Cash

Episode Date: June 12, 2023

Learn about how to avoid the latest money scams and whether it’s worth using your credit score to earn extra income. This Week in Your Money (00:00 - 08:06): Sean and Liz discuss the latest financial fraud to watch out for, including Google Voice scams and AI-generated voice spoofing, and provide insights and advice on how to stay safe and avoid becoming a victim. They also recommend resources for staying informed and where to go if you get defrauded. Today’s Money Question (08:07 - 26:05): Sara Rathner joins this episode to help answer a listener's question about whether they should use tradelines to earn extra income, and she discusses the ethical concerns of selling authorized user slots on credit cards. She also suggests alternative ways to build credit and discusses the importance of setting financial goals and being disciplined with the extra income you earn. In their conversation, Sean, Liz and Sara discuss: how to avoid money scams; social engineering and identity theft; how tradelines work; credit score safety; credit card authorized users; methods for building credit; and ideas for approaching side hustles. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Timestamps: This Week in Your Money segment: 0:00 - 08:06 Money Question segment: 08:07 - 26:05 Like what you hear? Please leave us a review and tell a friend.

Your credit report can help you borrow money, but what if you could use your credit report to earn money? Would you do it, even if it was a little sketchy? Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Liz Weston. And I'm Sean Piles. Listener, I have a question for you. What are you thinking about? Money-wise, I mean. Are you wondering how to buy a house in a still expensive market? Or do you want to get serious about saving for retirement but aren't sure how? Whatever your money question, the nerds have your back.

You can leave us a voicemail or text us on the nerd hotline at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. This episode, Liz, Sarah, and I answer a listener's question about making money from your credit report. But first, in our This Week in Your Money segment, Liz and I are talking about the scams you need to watch out for now. Yes, because scammers work hard, but the nerds work harder. So we're going to give you the scoop on how fraudsters are attempting to strip you and your loved ones of your money and your personal information. Indeed. So Liz, what scams should our listeners be aware of? Okay. According to

the Identity Theft Resource Center, the top scam in 2022 was the Google voice scam. And how it works is typically somebody will contact you on social media in response to a post, whether you're selling something, trying to find a lost pet, something like that. But then the person will say they're concerned about scammers, so they want you to confirm your identity through a text. You then get a text with a Google Voice verification code, and if you give it to them, poof, you've been scammed. Okay, so you have been scammed through a text code. What's going on there? When you give the scammer that verification code, they're able to create a Google Voice account that's connected to your phone number. The scammer can then use that voice account to scam other people or even get more information about you to try to get into your accounts.

So the bottom line is, yes, yikes is right. Don't give strangers any verification code that you get through text. That's, you know, if it's dealing with your bank accounts, your financial accounts, Google Voice, whatever it is, if the text comes through and a stranger wants it, ignore them. And maybe avoid giving internet randos your phone number in general. Yeah, that's a good idea. Whenever I'm communicating with folks on apps, whether I'm trying to buy or sell something, I like to keep communication within that app.

When someone's trying to get you to communicate on a different platform, that to me is a red flag that they're up to no good. Oh, yeah, that's a really good point. And Sean, that wasn't the only scary scam we learned about recently. Can you talk about artificial intelligence scams? Yes. Artificial intelligence is being used by scammers now in a terrifying way. There is a growing number of AI voice spoofing scams, and here's how it works. You might get a call from a sibling, a parent, friend, and they're absolutely hysterical.

They'll be sobbing and saying that they've been kidnapped and they need you to wire money to them ASAP to free them. And of course, you want to do that because you want to free your loved one. But the truth is that they were never in danger. That wasn't even your loved one calling you. It was a scammer using an AI-generated version of their voice and potentially a call spoofer to make it look like they were calling you directly. Oh my god, that's horrifying. Yes. And what's really scary is that in general, across the board, AI is developing faster than we can keep track of. And scammers are taking advantage of that. They're using the content that you post online, things like videos on TikTok or audio that you're recording on a

podcast, for example, and they're able to make a model of your voice inflection and all. So the example that I just gave shows how AI is being used in what's called imposter scams, but AI is also being used in other types of scams too. I'm having a moment here, Sean. It's like how much of our voice is out there, yours and mine. A tremendous amount. I hope that no scammers are listening to this because it would be very easy for them to use our voice to do exactly what I just described there. But there are some ways that we can protect ourselves, Liz, and anyone else listening.

So for AI voice spoofing, imposter scams specifically, one suggestion that sounds awfully dystopian, and it kind of is, is that you need to make a safe word or phrase for yourself and your loved ones. This is a word or phrase that in an emergency, your loved one could tell you or you could tell a loved one to confirm that it's actually them and not a scammer calling. Ideally, this would be a few words that you can use in a conversation that wouldn't be super obvious. Like you might say something along the lines of, oh, my wallet is on the dresser, instead of saying like, banana, banana, banana, that might kind of throw people off and sound a little bit awkward on their own thoughts. But yeah, in general, folks should know that scammers are always going to be leveraging new technologies to rip you off. So it's important to stay up to

date on the latest scams. And I just want to drop in. We actually came up with a safe phrase when my daughter was a teenager and she wanted to leave a party or leave a friend's house without kind of alerting them that there was a problem. So this isn't something that's way out of line. I think a lot of families do this anyway, but it's something to talk about and make sure everybody remembers what that phrase is so that you can use it in case of emergency. Absolutely. And now I want to zoom out a little bit and discuss the underlying technique that many scammers use to take advantage of you. This is something called social engineering, and it is essentially scammers attempting to manipulate you through social

interactions. This can happen many different ways. It could be someone posing as your boss, sending you a text message where they urgently need you to go buy them a bunch of gift cards. Or it could be that stranger messaging you online trying to get you to give up Google voice verification code like Liz mentioned earlier. The goal of the scammer is to manipulate your emotions through social interactions to earn your trust or create a sense of panic that makes you reveal your personal information or send them money. Yeah, and that sense of panic or that sense of urgency is key to the scam. So anytime somebody is pushing you, pushing your buttons, trying to make you do something quickly, that's a good time to step back or try to step back and take a breath and go,

hey, this might be a problem. And of course, if gift cards are involved, you know it's a scam. Yes. So Sean, what can we do? All right. I think folks should recognize that everyone is vulnerable to this and that even you, our smart, savvy listener, could potentially fall victim to some social engineering. But owning your susceptibility and knowing how scammers will try to dupe you can help you spot a scam before you give someone your personal information or money or both. And if you're looking for a resource to help educate you about scams, I recommend AARP's Fraud Watch. You don't actually have to be retired to take advantage of this, but they do a really good job of keeping track of scams that are on the rise and educating you about your options. Also, if you are the victim of a scam, please report it to the Federal Trade Commission and the Identity Theft Resource Center. All right, now let's get on to this episode's money question.

Sounds good. This episode's money question comes from Jamie, who left us a voicemail. Here it is. Hi, nerds. I wanted to call in and ask a question. I'm looking for a different opportunity to supplement my income, and I came across one opportunity that's called TradeLines. And I wanted your advice, your opinion on TradeLines, if it's something worth doing. To my understanding, TradeLines is when you sell your authorized user accounts on your credit

card to people who need to boost their credit for a certain amount of money a month. So I thought it may be a good way to supplement my income. As well as that, you know, I do have like 815 credit score. And so I was curious as to, yeah, your guys' opinion on the matter. So thank you for answering it. Have a great day. To help us answer Jamie's question on this episode of the podcast, we're joined by our dear smart money pal and regular host of the show, Sarah Rathner.

Hey, Sarah. Hey, everybody. Glad to be here. Great to chat with you, Sarah. So the practice of selling authorized user slots on your credit cards to strangers is not new, but it is sketchy for a number of reasons. Yeah, well, first we should back up and explain what an authorized user slot actually is.

It's basically the place where you add an authorized user, which is typically someone who you've added to your credit card, who's allowed to use your account to make charges, but who isn't responsible for making payments. Becoming an authorized user on somebody else's account can help your credit, assuming that primary user, that's the person who holds the account originally, is responsible in their use of the card. And it's a fairly common practice among people who actually know each other. You see this a lot with parents

and their children. Parents will add children as authorized users on their accounts until the child is old enough to get their own credit card account. That's usually between the ages of 18 and 21. You might also add a relative or a close friend to your credit card this way, both to give them access to the card if they need it, and you have that agreement, and also to help them build credit. And credit card issuers and credit scoring companies are basically cool with this. This is a feature that's built into cards. And you can always opt to not give the authorized user an actual card. So they are added to your account, but they don't have a physical card with which to

make any purchases. So you're building their credit without letting them spend your money. Yeah. And what's most relevant to our listeners question is that some companies have decided to turn this into a business. They sign up folks who are willing to rent out their authorized user slots and charge people who are trying to build their credit. Right. And the thing is, the companies that do this typically keep the vast majority of the quote unquote rent. They could charge up to a thousand dollars for one of your authorized user slots, but you only get 50 to 300 dollars and they pocket the rest. But you have to do the work of contacting your issuer, adding the person as an authorized user, and then removing them when the rental period is done. And you can add an authorized user online pretty easily for the most part,

but you may have to call and wait on holds to remove them. So now we're talking about a fairly decent amount of your time and effort for $50 to $300. Not great. Trade line sellers promise their users don't get access to your credit card information and won't make purchases. But you're going to want to keep an eye on your transactions to make sure. And credit card issuers, even though they allow for authorized users, they're not fans of this, obviously. If your issuer figures out what you're doing, they could close your account and that could hurt your credit score. And again, you have a stranger attached to your trade line, which just feels kind of weird and gross to me.

Yeah, honestly, like I wouldn't even want most people I know to be attached to my trade line, let alone complete strangers. No offense to literally everyone I know, but no, don't touch my money. There are also some ethical concerns around selling your trade lines. First, you are perpetuating and profiting off a system that makes people who are in a vulnerable position pay for access to better credit, at least on a short-term basis. Meanwhile, the person renting your trade line may not be getting a long-term solution to their credit woes

because after they are done renting your trade line, that account comes off their credit reports and their credit could go right back to where it was originally. And then there are also the ethics of potentially violating the terms of your agreement with your credit card issuer. Yeah, trade line sellers like to tout themselves

as providing more equitable access to credit, which is complete bollocks, essentially. I know we're a clean podcast, but I was trying to think of alternatives to the word I have in my mind. So listeners just envision what you think I was about to say, and you're probably right. There's nothing equitable about charging a person $1,000 to build their credit, point blank. That is absolute nonsense. Another nice way to put that. You can improve your credit score over time without buying a trade line from a stranger. It's not necessarily going to be free. I will get into that. But it'll be a significantly lower cost. And you can often get that money back. So let me explain how. One way is to utilize what's called a secured credit card. That's a

credit card where there's typically no credit check required. You don't have to have an established credit history. You could have bad credit as well. You put down a cash deposit. Oftentimes, it's around $200, but there are some cards that have lower deposits. And if you have the money and you require a higher credit limit, then you can also put down more. That cash deposit becomes your credit limit. That's the amount that you can charge every billing cycle on your card. And then you use your card carefully and responsibly for a couple of

months, don't charge more than maybe 30% of that total credit limit, put like one recurring charge on there, like a streaming service, or your cell phone bill or something like that, pay it off on time in full every month. And you'll start to see within several months, you're beginning to establish that credit history. And when you reach a point where you're ready to graduate to a more traditional unsecured credit card that doesn't require that security deposit, you'll actually get that money back. So you're essentially just fronting the money for yourself, rather than paying this separate entity money that you'll never get back to supposedly build your credit. Another option is something called a credit builder loan. That's essentially a really small

personal loan that you do pay interest on. And then you make like regular payments, and then the loan is paid off. You do have to make interest payments on this. But it is, again, a more legitimate way to build your credit. So that's option two. Option three is being added as an authorized user of a card held by somebody you actually know personally, a friend or a family member that you trust. So those are three other options for you that will not cost you this outsized amount of money. Yeah. And the impact of using a secured credit card or a credit builder loan will remain on your credit profile for years to come, unlike simply renting the trade line where it is, again, gone after

you're done paying for it. Well, now let's get to another part of our listeners question, which was really just about how to supplement your income. And there are lots of ways to do it that are not as sketchy as the trade line option that we have just gone deep into. Sarah, I'm wondering if you have any thoughts about this or if you have had any success maybe working on a side hustle and supplementing your income in the past. Yeah. I mean, listen, here's the thing. It's really hard to make money for nothing. So oftentimes, the most sustainable side hustles that can be the most lucrative, actually utilize a skill that you already have. I am a writer, I have worked as a freelancer. So

that's been my side hustle, I got into ghostwriting. And I got into ghostwriting for financial planners, which was how I learned so much about personal finance. That's how I got my start. And so if you have a skill, that is something you can monetize, preferably not something that's like a fun hobby, because when you monetize a hobby, it becomes like a real drag. But if it's just a skill that you have, like maybe you are good at home repairs, and you can, you know, do little home repair jobs for friends and neighbors, dog walking, cat sitting, obviously babysitting. There are lots of things that you can do that you can charge money for. Yeah. So start doing that. I mean, even helping friends like clean out their basement,

and then charging them by the hour for that. If you're a really organized person, that's a great way to make money. Yeah, I will say I'm wary of any sort of side hustle that markets itself as first and foremost being easy, because there's usually some kind of catch like they're just a straight up scam or a little weird. Like, you know, you're selling photos of your feet or something on the Internet. So, you know, some people are totally fine with that. That's up to them. But you have to kind of think about the trade off. If something is easy, you'll be doing something else a little bit different elsewhere. And like you said, Sarah, there are a lot of videos that I see in my TikTok feed that are like, oh, if you are a painter or if you're into photography, you can just monetize that and set up an Etsy shop.

But when you turn your creative outlet into a source of income, it can really suck all the joy from it. So even if that is a skill and it's something you'd like to spend your time on, it's kind of nice to have some things that aren't about making money and to have it be distinctly your own personal hobby. So I would caution against trying to make money off of that if you have such a creative hobby. Yeah. And sometimes creative copies, like crafting, photography, things like that. It's a fair amount of investment at the outset of buying equipment and materials that you need. So it takes a long time to become a profitable professional photographer, for example. If you're looking for a quick way to make money from a side

hustle, you want to think about the initial investment. That's, you know, for me becoming a side hustling as a writer meant using the laptop I already owned. So that wasn't too, too high of a lift for me. But if I decided to sell hand knit sweaters on Etsy, then I would have to invest in the equipment, the yarn, which is expensive, and also the time building up inventory and then selling it online, and probably paying fees to whatever site I was using to make those sales. So that's what you want to think you want to think about that cost benefit analysis of that side hustle, how much do you have to buy in to get started? Which brings us to another thing, multi level marketing schemes. You know, when you have to buy like $10,000

worth of ugly leggings to like keep in your garage, and then you try to sell them to all your neighbors and all of your neighbors secretly hate you and talk about you behind your back. Don't do that. We don't like it. We're not going to buy your ugly leggings. We have a ton of information on the site to help you find a good side hustle. We've got an article about side hustles, you can start with no money. And we have 25 ways to make money online, offline and at home. So check out those links on our show notes. And I have some other considerations for our listener or anyone else that's really interested in supplementing their income, maybe starting a

side hustle. And I think that's important for them to determine if there's a specific amount of money they want to earn monthly, knowing that could help them narrow down their options in terms of what sort of side hustle they want to focus on. I'm just wondering also, what's driving their push for this? Is there some sort of budget shortfall that they have too? And if so, could they maybe make up for that by cutting expenses? But in terms of other side hustles, there are a few other parameters to think about besides how much they might want to earn monthly. Like how much time do they want to spend on a side gig? How much effort do they really want to exert? These are things that come to mind for me because I'm someone who has done some side work in the past. And I kind of resented it because when I'm not working my nine to five job, I want to have that time for myself. And having to then pick up another

job after I've worked all day long, it just isn't appealing for me personally. So I think it's important for anyone who's getting into this to just know what they do and don't want to do around a side hustle. That is absolutely valid. I when I was doing the the side hustle on top of a full time job thing. I mean, my life outside of work really took a hit. It was a substantial amount of time. And I was at a point in my life where I could dedicate the time to do it, but you get real tired. I mean, I'm not gonna lie. So that's something to think about. How much additional working hours per week are you going to be adding onto your plate?

And if it's the kind of thing where like, you know, you tutor two kids for like two hours a week, maybe that feels sustainable for you on top of your normal full time job. But if you're talking about an extra 10 to 20 hours a week of work or more, I mean, that's like taking on another full time job and everything else in your life is going to suffer. Well, speaking of jobs, you might have the opportunity to like if you do hourly work, you may be able to volunteer for another shift or work more hours, or simply put more effort into getting a promotion at work so you can earn more money. Sometimes that's a much more efficient way to go about increasing your income than picking up a side hustle. Yeah, or even job hunting and negotiating a higher salary in a new position too. There you go. I think there are some creative ways where you can get some maybe extra benefit from a side job that you pick up. One thing that I've considered in the past is actually picking up a part-time job at my local nursery, maybe working one day a week for a few hours. And as someone who's really into gardening, if I could get a discount

on their plants, in addition to making a little bit more money and getting to know more about these plants and connect with people who are really into gardening in my community, that has a lot of benefits for me. And it would make the time I would spend working worth it if I were to do that. Oh, and you're reminding me, a friend of mine picked up a job with an airline largely for the travel benefits. So she works, I think about 20 hours a week. She has a lot of flexibility and she can fly either for free or get this, pay 60 bucks and go first class. I would shift some luggage for that. That sounds like a pretty good deal to me. Yeah. That also raises the idea again of like, what are you getting besides the money from a

side gig? There are so many other things to weigh beyond just the time that you spend. Like, how can you really make any sort of side gig worth it for you truly? Yeah. And then you talk about supplementing your income, like what are you going to do with that money? What's your plan? Maybe you have some debts you need to pay off. Or if you're bringing in an extra 100 $200 a month, is that money going into your debt? Or is it easy to just justify spending more because you have a little extra money in your pocket. So the after what has to come after all that extra work is the discipline to actually apply that money into a specific goal or a specific problem you're trying to solve in

your life with that extra money. So definitely be really diligent about, okay, this is how much extra money I'm earning every month, I'm putting it right into my credit card debt, I'm putting it right into my student loan, I'm putting it right into this savings goal that I have, or an investing goal that I have. And I'm not just putting it into my checking account and then spending more money. All right. Well, Sarah, thank you for talking with us. Thanks for having me. And with that, let's get on to our takeaway tips. And I will start us off. Be skeptical of anyone promising promising quote, easy money. Trade line sellers make most of the profit and take none of the risk of adding strangers

to your credit card's authorized user slots. Next, beware of sacrificing your good credit for profit. If your credit card issuer shuts down your accounts, that could hurt your credit scores. Finally, consider other options. There are many other side hustles that can supplement your income that are 100% above board. And that's all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call or text us your questions at 901-730-6373.

That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. And visit nerdwallet.com slash podcast for more information on this episode. Remember to follow, rate, and review us wherever you're getting this podcast. And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. This episode was produced by Sean Piles and myself with the help of Tess Figland,

Haley Monahan mixed our audio, and a big thank you to the thoughtful folks on the NerdWallet copy desk for all their help. And with that said, until next time, turn to the nerds.