2-Minute Money Manager: Should I Pay a Fee to Win a Prize?

Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.

Today’s question is about prizes; specifically, it there’s ever a situation when you should pay money up front to win a prize.

Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.

You also can learn how to send in a question of your own below.

For more information, check out “10 Golden Rules to Avoid Getting Scammed” and “10 Types of People Who Fall for Scams, Schemes and Cons.” You can also go to the search at the top of this page, put in the words “rip-off” or “scam” and find plenty of information on just about everything relating to this topic.

And if you need anything from a cellphone plan to a mortgage, be sure and visit our Solutions Center. That’s a place you won’t get ripped off.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by Money Talks News, serving up the best in personal finance news and advice since 1991.

Today’s question comes from Stephen:

“Are there any scams where you win a product, pay shipping and handling, but in every case they want your credit card? I enter lots of contests, and when I ask if they take checks for shipping and handling, all say ‘no.'”

The saddest story I ever covered

I’ve been a consumer reporter on TV for nearly 30 years, so I’ve covered lots of sad stories: Consumers being ripped off, overcharged, ignored, cheated, foreclosed on, you name it.

But the saddest case I witnessed occurred back in 2013. It involved an 82-year-old woman named Reta. You’ve met people like her: a tiny, kind old woman with a sparkle in her eyes and a permanent smile on her face. The kind of person who offers cookies and milk to every visitor. The grandma you either had or wished you had.

This is from the story we did at the time:

“The caller told Reta she’d won a big sweepstakes, and would soon be receiving two new cars. All she had to do was send cash to cover taxes and handling fees. Reta complied, then waited.

Several weeks later, another call: After one more small fee, her cars would be arriving. Anticipating the photographers she was told would be there, she went to the salon and had her hair and makeup done. She dressed in a new outfit and even had a professional photo of her own taken to remember the day.

As you may have guessed, the cars never came. But what did was more calls promising prizes. Hundreds of them — sometimes dozens in a single day.”

When we arrived at Reta’s home that day back in 2013, the phone was ringing. And it never stopped. In fact, the only way to get through the interview with her or the postal inspectors who were also there was to unplug her phone.

Every caller was a Jamaican scam artist demanding money so they could deliver the prizes she’d “won.” Her trash can was overflowing with offers; she’d lost all her savings and even mortgaged her home to pay tens of thousands in phony prize scam fees. She was destitute.

A ton of scam artists had Reta’s number because after she succumbed to the first few “prize” offers, her information was likely sold to other scammers. Ultimately, so many reached out that the mail and calls never stopped. We taped postal inspectors answering Reta’s phone, identifying themselves and threatening to arrest the scam artists. The scammers simply cursed them, hung up and called back later.

They weren’t afraid of U.S. cops because they weren’t in the U.S.

The factors behind this nightmare scenario are all too common. First, Reta wasn’t used to a world with so much blatant deceit. Next, she was a bit confused. She wasn’t senile; she knew where she was and knew enough to take care of herself. But until her money was finally gone, she just couldn’t seem to grasp that criminals were bleeding her dry.

Finally, Reta was the ideal victim because she had no one to help her. Her family lived far away. Her one local friend did what he could; that’s how postal inspectors found her. The postal inspectors were doing everything they could to help, but they couldn’t arrest people in Jamaica, and they couldn’t seem to convince Reta to stop entering sweepstakes or answering calls.

Listen to the FTC

Reta’s story is an example of why reporters like me and agencies like the Federal Trade Commission urge people not to enter any contest that requires paying to claim a prize. Here’s language directly from the FTC’s website.

“Although there are some legitimate contests, remember: There are a lot of scams. Here are a few ways to spot a prize scam:

• Scammers ask you to pay before you can claim your prize. Legitimate sweepstakes don’t make you pay a fee or buy something to enter or improve your chances of winning. Scammers might try to sound official and say it’s for “taxes,” “shipping and handling charges” or “processing fees.” Don’t pay to claim a prize, and never give your checking or credit card number for a sweepstakes promotion.
• Scammers ask you to wire money to “insure” delivery of your prize. Don’t do it. Legitimate sweepstakes don’t ask you to wire money. Once you wire money, you can’t get it back. The same goes for sending a check or money order by overnight delivery or putting money on a prepaid debit card.
• Scammers send you a check and ask you to send some of the money back. But the check is fake, and you’re responsible for repaying the bank.
• Scammers use the names of well-known companies for prize scams. Con artists often pretend to call from well-known companies to make themselves appear legitimate and gain your trust. If you don’t remember entering, you probably didn’t. If you think it may be legit, use a search engine to find the company’s real phone number. Call to confirm that you entered a contest before responding to any claims that you won.”

That’s pretty black and white, folks: Don’t pay to win a prize.

Here at Money Talks News, we periodically run sweepstakes to boost our subscriber base. We’ve never asked anyone to pay anything to enter or to win. We even pay for the stamp we use to mail the winner a check.

Now help others

Whether you know it or not, there’s a Reta near you. He or she could be a member of your family, a friend or a neighbor. Don’t sit idly by while such a person loses their life savings to scum-sucking vermin. Forward this story, or better yet, reach out to him or her. Let the person know you’re around to help if he or she ever needs you.

It won’t cost you a thing and could mean everything to that person.

Bottom line? If Money Talks News can give money away without asking for any, so can every other business. When it comes to paying to win — whether it’s Stephen, Reta or anyone else — just say no. No to a check. No to a wire transfer. No to a credit card. No to a scam.

Hope that answers your question, Stephen, and see you all right here next time!

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About me

I founded Money Talks News in 1991. I’m a CPA, and I’ve also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

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