Warning: How criminals steal your banking info over the phone

Criminals are impersonating bank employees and getting customers to hand over their debit and credit card security codes, according to TV station KION.

Police in Carmel, California, are reportedly warning residents about this scam, but the message — and steps on how to stay safe — is relevant to everyone.

Report: New bank scam targets phone users with bank accounts

The scam works like this: A crook calls your phone pretending to be an employee from your bank.

What makes it more believable is that the phone number appears to be from your financial institution because of a technology called caller ID spoofing.

The thief typically tells you that your account has been compromised in some way, KION reports. To fix the issue, the crooks ask for the three-digit code on the back of your credit card.

Do don’t it: That three-digit code, known as a CVV (card verification value) or CVC (card verification code) is an anti-fraud measure.

Those numbers are part of the verification process that merchants need to go through to charge a transaction to your card.

In the event that you do happen to get a phone call from your bank, here are two things you should make sure of:

• Make sure they address you by your full name. They may have the wrong person.
• Make sure they identify themselves at the outset. You need to always know who you’re talking to.

Bank scam: What to do if you get a call

Don’t give out your personal info: The main thing you need to know about dealing with phone calls from a bank is to never divulge any information: Banks don’t ask for personal information over the phone.

Hang up the phone: If someone from a financial institution (or anyone really) asks for your personal information, hang up immediately.

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File a complaint: Visit the Federal Trade Commission’s Consumer Complaint Center at consumercomplaints.fcc.gov  or call them at call 1-877-FTC-HELP.

Here are 3 things your bank will never do

If you receive calls from time to time from financial institutions, you should always feel confident in who you’re dealing with.

Here are some red flags that will let you know that you’re dealing with a scammer on the other line:

• They ask for your full Social Security number, bank account or credit card number.
• They ask you to send sensitive bank information via email
• They ask you to go to a third-party site to enter your personal information

Here’s what money expert Clark Howard says about this scam: “Understand this: No one is ever going to call you from your bank or credit union in possession of your credit or debit card number and ask you for either your four-digit PIN or your three- or four-digit code from the card.”

Clark says here’s the #1 way to stay safe from this bank scam:

“You never, ever NOT EVER give someone pretending to be from a bank or credit union that information because that unlocks their ability to pretend to be you and have a field day buying as if they are you.”

Listen to Clark Howard talk about this phone scam

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Ask Clark: What should you do when your term life insurance rates skyrocket?

When consumers have financial problems in their lives, they turn to a trusted source for information like Clark.com.

Such was the case with this Twitter user who wanted advice on how to handle a sudden spike in his term life insurance premium.

@ClarkHoward I have a term life insurance policy and am 72 years old. The premium went from $142/mo to $675/mo and I just received notice that it is going to $1200/mo in Sept. What other options are available?

— Larry Winn (@LrwinWinn) July 24, 2018

Term life insurance premium too high? Consider this

If you’re heard Clark talk about life insurance, you know that he recommends level term life insurance. The beauty of level term life insurance is that you pay one fixed rate for the entire life (aka the term) of the policy. And the cost never goes up!

But level term life is a relatively new development in the insurance world. If you bought your policy years ago, you might be in a term life policy that’s not “guaranteed level.”

Understanding annual renewable term vs. guaranteed level

There’s something in the world of insurance called annual renewable term (ART). An ART policy covers you for one year. At the end of the year, you can renew the ART policy for another 365 days — usually at a slightly higher premium.

The thing about ART is that it tends to offer a lower premium during the first couple years than you would get with a guaranteed level policy. So it’s easy to look at quotes for the two different flavors of term life policies and think you’re making the smart choice by going with an ART.

By the way, if you have access to a group life insurance policy through your employer, ART is usually what you’re offered. You can think of it almost like buying a homeowners insurance policy a year at a time — except that it’s on your life, not your home.

But here’s the thing: Because ART policies will become more expensive as time goes on, they’re only recommended when you have a short-term need for life insurance. Otherwise, you want to lock in with a guaranteed level term policy, as Clark advises.

Wondering about the specifics of when an ART might be the right choice in your life?

Insurance site Haven gives the example of a smoker applying for life insurance who wants to quit but isn’t quite there yet. This hypothetical customer could probably get a lower rate with an ART policy for the first year versus a level-term policy for which they would underwrite and get locked in with higher rates as a tobacco user.

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If they opt for the ART, they could spend that first year working on kicking the habit. Once our smoker has quit for good, he or she could likely get a better deal on a guaranteed level policy as a non-smoker instead of continuing on as an ART customer.

So it appears that the Twitter user who wrote into Clark above likely has term life that is not guaranteed level, but rather annual renewable term.

Here’s another factor driving up his rate: The poster notes that his age is 72. Because he’s above 70, the actuarial tables insurers use to set rate are working against him big-time with an ART policy.

Think about it: It stands to reason there’s a greater rate of mortality after age 70 than, say, before age 30 or 40. And a higher cost follows when you have higher risk. So that also explains the steady uptick in price over the last term from $142/month to $675/month, and now the enormous 77% jump to $1200/month that he’s facing.

Now that we know the likely reasons why the poster’s policy is going up, what should he do about it?

Here are Clark’s recommendations

When we spoke with Clark Howard about the poster’s situation, the money expert had a couple of thoughts:

Based on what the poster told us, Clark thinks the man was probably in a guaranteed-level term policy that ran through age 70. Then once he hit 70, it came to an end and switched to annual renewable term from that point on.

But there’s a bigger question here: Is there still an insurable need for this insurance?

The answer is likely not. You get insurance for replacement of income to support your dependents in the event of your death. At 72, it’s less likely there are dependents to support to begin with. So that may negate the need for a policy in the first place and he can stop paying on it.

However, let’s play devil’s advocate and say there is an ongoing insurable need even at age 72. In that case, the best solution would be to shop the marketplace. There may be another insurer who offers a better deal on ART.

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Shopping is easy on the internet. You can comparison shop for new quotes at any of a number of sites below, which we’ve listed alphabetically:

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Ask Clark: Should you ever take a loan from your 401(k)?

If you are facing a large amount of debt or a big unexpected expense and have a sizeable amount of money built up in your retirement account at work, you might be tempted to borrow from your 401(k). But is that the right thing to do?

Why borrowing from your 401(k) should be your last resort

It’s a question money expert Clark Howard gets all of the time, and he feels very strongly about the answer:

“Almost 100% of the time people have asked me about borrowing from their 401(k), the answer is ‘No!'” Clark says. “That has to be the last option and something you do when you’re out of all other possibilities.”

“When people do borrow from a 401(k), historically it means that they end up with not near enough money to live on in retirement,” he says.

That’s scary, considering that according to a study from the Investment Company Institute, nearly one in five people who are eligible have a loan against their 401(k). Here are the main reasons it’s not a good idea:

You’re likely to reduce or stop your contributions during payback

Research from Fidelity says about a quarter of people who take a 401(k) loan reduce how much cash they put away for retirement while they’re repaying the loan. That’s because they’re struggling to make those payments back. Worse still, 15% of people end up stopping contributions completely within five years of taking a loan.

“Even a single loan from a 401(k) can throw you off-track because you lose so much time in saving for retirement and having to pay back that loan, which often reduces what you can contribute,” Clark says.

The ‘I’m paying myself back’ rationale isn’t so straightforward

When people do a 401(k) loan, they tend to justify it by saying, “Well, it’s my money — I’m paying myself back.” But the thing is, you are paying yourself back with after-tax money that will be taxed again when you retire.

You’d better keep your job

Clark: “Also remember that if you leave a job — whether they fire you or you leave on your own — the money on that loan is due pretty quickly. If you can’t pay it, you trigger a HUGE tax bill, plus penalties.”

In the past, you generally had just 60 days to pay back the loan before the taxes and penalties would kick in. Under the new tax law, you have until the due date for filing the taxes for the year in which you leave your job.

For example, if you leave your job sometime in 2019, you have until April 15, 2020 (October 15 if you file an extension) to pay back the loan in its entirety. Still, not necessarily a long time.

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The real cost is opportunity cost

In the long run, the stock market has a lot more up years than down years. If you’re not as invested in the market because you’ve reduced or stopped your contributions during payback, you’re missing a lot of the gain that takes place over time.

“I’ve told you in the past about the heavy taxes you have to pay on your money when you tap into it before retirement,” Clark says. “But the big cost here is an opportunity one. If the money’s not there, it has no chance to grow and multiply over the years.”

The net effect is less for you in retirement

A 401(k) loan today can mean a big reduction in what you have to live on in retirement. You might either have to work more years to make up for it or be in near-poverty during retirement.

“Even though the interest rate on that 401(k) loan seems really good, the problem is that you are devastating your future. You are taking money out of that account that you will never recover,” Clark says.

Final thought

Although it may look attractive, a loan from your 401(k) is almost never a good idea.

“Most people want to be able to retire at some point and have leisure time,” Clark says. “Borrowing against your retirement plan is a sure way to sabotage your future.”

Key points:

• You should avoid borrowing against your 401(k) unless there are no other options
• Borrowing against your retirement plan can put you in a really tough spot in the future
• If you do have to borrow against your plan, do whatever it takes to keep saving for retirement

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