What Are Phishing Scams and How Can You Protect Your Finances?

Phishing scams are fraudulent attempts to steal sensitive information by impersonating legitimate companies or contacts. Scammers use email, text messages (“smishing”), phone calls (“vishing”), social media, and forged websites to trick people into giving up account credentials, Social Security numbers, credit card details, or authorizing payments. In my work advising clients and small businesses for more than a decade, I’ve seen how a single successful phishing attack can lead to drained bank accounts, hijacked investment accounts, and months of identity-recovery work.

Below I provide practical, prioritized steps you can use immediately to reduce your risk, plus a clear recovery checklist if you or your organization clicks a malicious link.

Why phishing matters for your finances

  • Financial accounts are primary targets: a successful login gives attackers direct access to money and to reset other accounts.
  • Business Email Compromise (BEC) and invoice fraud often start with phishing and lead to wire transfer losses or fraudulent vendor payments (reported regularly to the FBI’s Internet Crime Complaint Center).
  • Phishing also enables identity theft that affects tax returns, credit reports, and future loan applications.

Authoritative resources: Federal Trade Commission (FTC) guidance on phishing and reporting (https://www.ftc.gov), FBI IC3 for internet crime complaints (https://www.ic3.gov), and the IRS Identity Theft Central for tax-related scams (https://www.irs.gov/identity-theft-central).

How phishing scams typically work

  1. Reconnaissance: Scammers gather names, email addresses, account numbers, or job titles from data breaches, social media, or public records.
  2. Bait: They craft a message that looks urgent or important — a security alert from your bank, a payment request from a vendor, or a notice from a government agency.
  3. Action hook: The message asks you to click a link, open an attachment, or call a number. The link may go to a cloned website that captures credentials.
  4. Exploitation: With stolen credentials, attackers log in, transfer funds, change recovery contact details, or sell credentials on underground markets.

Tactics vary: broad mass-mailing “spray” attacks, targeted spear-phishing that uses personal details, smishing texts that rely on mobile user behavior, and vishing phone calls that use social engineering.

Practical prevention steps (what to do now)

  1. Use multi-factor authentication (MFA) everywhere
  • Enable MFA on bank, investment, email, and tax accounts. Prefer app-based authenticators (Google Authenticator, Microsoft Authenticator, or hardware security keys) over SMS when possible. MFA blocks most credential-based takeovers even if your password is stolen.
  1. Use a password manager and unique passwords
  • A password manager generates and stores unique strong passwords so you don’t reuse logins across sites. This prevents a single breach from cascading to multiple accounts.
  1. Verify before you click or respond
  • Hover over links on desktop to reveal the real URL. On mobile, press and hold a link to preview it. If an email claims to be from your bank, open the bank app or type the official URL yourself instead of clicking.
  • Check the sender’s full email address, not just the display name — common scams use lookalike domains (example@bank-secure.com vs example@bank.com).
  1. Treat attachments and unexpected links as suspicious
  • Never enable macros in unsolicited Office documents. Use preview features or virus-scan attachments before opening.
  1. Keep devices and software patched
  • Apply operating system and app updates promptly. Many phishing attacks pair credential theft with malware that exploits unpatched software.
  1. Harden email and business workflows
  • For businesses, require dual approval for wire transfers and vendor setup changes. Verify payment changes by calling a known number (not the one in an email).
  • Deploy email filtering with anti-phishing and DMARC/DKIM/SPF checks to reduce spoofed messages.
  1. Train yourself and your team regularly
  • Short, practical phishing training with simulated exercises reduces click rates. Make reporting spam and suspicious emails part of daily routine.
  1. Use monitoring and credit controls
  • Enroll in account alerts (login alerts, transfer notices) and consider credit freezes or fraud alerts with Equifax, Experian, and TransUnion if you suspect identity risk. CFPB has consumer guidance on credit freezes (https://www.consumerfinance.gov).

Internal reading: See our guides on How to Spot and Report Phishing and Payment Fraud and Cybersecurity Essentials for Personal Financial Accounts for step-by-step checklists and templates you can use with banks and vendors.

If you clicked a phishing link or entered credentials — immediate recovery steps

  1. Disconnect and assess
  • If you suspect malware, disconnect the device from the network and stop online banking from that device until it’s clean. Use another known-clean device to change passwords.
  1. Change passwords and MFA
  • From a clean device, change the password for the compromised account and any accounts using the same password. Revoke sessions and reset MFA methods if available.
  1. Notify financial institutions
  • Contact your bank, credit card issuers, and brokerage immediately. Ask them to watch for unauthorized transactions and to block or close affected accounts if needed.
  1. Run malware scans and, if necessary, rebuild the device
  • Use reputable anti-malware tools. For serious infections, reinstall the OS from a trusted backup or have an IT professional reimage the machine.
  1. Report the crime
  1. Protect your credit and identity
  • Place a fraud alert or credit freeze with the three major bureaus if personal data was exposed. Consider credit monitoring while you sort the issue.
  1. Keep records
  • Save copies of phishing emails, screenshots, and all communications with financial institutions. These records help dispute fraudulent charges and support law enforcement reports.

Additional help: Our article What to Do After a Data Breach: A Consumer Action Plan walks through timelines and report templates for consumers.

Business-specific defenses (small business focus)

  • Implement separation of duties for payments and vendor onboarding. Require voice or video confirmation for unexpected payment changes.
  • Use bank controls like ACH blocks, positive pay, and daily transfer limits where available.
  • Maintain an incident response playbook with roles, vendor contacts, and legal counsel details. Quick action reduces financial exposure and regulatory risk.

In my practice, businesses that adopt these simple operational controls reduce successful BEC incidents by a large margin.

Common phishing indicators to watch for

  • Sense of urgency, threat, or a penalty for inaction.
  • Generic greetings (“Dear Customer”) when the sender should know your name.
  • Requests for passwords, full SSN, or one-time codes.
  • Misspelled domain names, odd punctuation, or unexpected sender addresses.
  • Attachments you didn’t expect, especially with .zip, .exe, .docm, or macros.

If you’re uncertain, contact the company through an official channel (their published website or phone number) rather than replying.

When to involve law enforcement or a professional

  • Report to the police if you suffered a financial loss; a police report helps disputes and insurance claims.
  • Contact a cybersecurity professional for malware or complex intrusions.
  • Consider a credit monitoring or identity-restoration service if your SSN or other highly sensitive information was exposed.

Final checklist (one-page action plan)

  • Enable MFA on all financial and email accounts.
  • Use a reputable password manager and unique passwords.
  • Verify links and sender domains before clicking.
  • Keep devices patched and use updated anti-malware.
  • For businesses: require dual approvals and validate payment changes by phone.
  • If compromised: change passwords from a clean device, notify banks, file FTC/IC3 reports, and place a credit freeze if needed.

Professional disclaimer: The guidance above is educational and general in nature. It does not replace personalized legal, tax, or cybersecurity advice. For complex incidents, consult your financial institution, a licensed cybersecurity firm, or legal counsel.

Authoritative sources and further reading

In my 15 years advising individuals and small businesses, the single most effective measures I’ve seen are enabling MFA, using a password manager, and verifying payment instructions by phone. Those three steps alone stop the majority of phishing-based financial losses.

If you want, use the internal guides linked above for printable checklists and communication templates to send to your staff or family.