The 5 Worst Home-Based Business Scams

In a forum devoted to education and careers, a blog devoted to this topic was inevitable - home-based business scams. Anyone who has an email account has gotten an email - if not a thousand - like this:

Earn an Extra $5K+ per month!
Make your financial dreams happen!
Free information and training package!

Usually, the email includes a testimonial or two from people "just like you."

Before I started this business, I used to [insert bad career here]. But I started working [insert home-based business opportunity here] and made $2500 my first month! By my sixth month, I was making $11,000. This business is a dream come true!

Some of these emails can be fairly persuasive, especially if it's been a tight month. I mean, who wouldn't want to earn a little extra money? Then I think of the old adage, "if it sounds too good to be true, it probably is," and I realize I'm probably dealing with a home-based business scam. At that point, the email becomes ridiculous.

But the truth is that thousands - if not tens of thousands - of people fall for these scams every day. Sadly, for many of these people, that decision will be disastrous. Home-based business scams tend to target people who can ill afford such a misstep - the sick and disabled, the elderly, stay-at-home mothers, low-income families, and people lacking a college education. (Note: it's not that people without college educations are less intelligent per se; rather, because they don't have college degrees, chances are they are more inclined to take risks.)

For anyone who's ever received these emails - or who every will - let me identify five of the most common and pernicious home business scams, which I've gleaned from several websites issuing similar warnings. Think of it as a public service announcement.

1. Multi-level Marketing (MLM)

Basically, multi-level marketing entails selling some kind of product or service but also rewards the participant for recruiting other people to join. Typically, early recruits are paid by the entry fees gleaned from new recruits, who in turn must collect their rewards from others. Each level feeds (or builds) off the one after it, which is why MLMs are sometimes referred to as "pyramid schemes." Granted, not all MLMs are true pyramid schemes - which is illegal in most states - but most MLMs still rely on deception in order to succeed. As such, beware of MLM "opportunities" that promise large incomes for selling dubious products and recruiting fellow distributors.
2. Reshipping Fraud

Reshipping involves receiving mail merchandise and then repackaging and reshipping it for a substantial profit. Sounds easy, right? The only problem is that the merchandise was paid for with stolen credit cards, which means you - the reshipper - are acting as a "fence" for stolen goods. Reshipping fraud is relatively new to the realm of home-business fraud; as such, reshipping "opportunities" still appear in legitimate newspapers and websites, which lend them an air of credibility. Don't be fooled. Reshipping fraud is not only illegal but also dangerous.

3. Craft Assembly

The variations on this scam are legion, but essentially it involves a company outsourcing the assembly of its product to you. All you need is a start-up kit and raw materials, which you purchase from the company, of course, and which you can do at home. Once you've assembled the products - toys, magnets, jewelry - you send it back to the company only to find that your products "fail to meet specifications." You're left with a bunch of useless products and no one to sell them to. Beware.

4. Medical Billing

The basic sales pitch with medical billing is that the health care industry is inundated with unprocessed paper claims and there's a need for someone - you - to process these claims electronically. The beauty of this scam is that it's true - there is a need and you can make money processing claims. The training you receive from promoters, while overpriced, will be legitimate. The only problem is that once you've finished your training you have to generate your own business. That's where the scam comes in - promoters tend to over-hype their ability to get you contacts within the medical community. The fact is that few medical-billing entrepreneurs are able to attract clients and earn a reasonable income. The truth is that the medical billing market revolves around several large firms and competition is stiff.

And finally...

5. Envelope Stuffing

The doyen of home-based business scams has been around since the 1920s. One website even referred to it as the "cockroach you just can't eliminate." Basically, this scam involves you sending off a fee to learn how to make money stuffing envelopes from home. Shortly thereafter, you get a letter telling you to place a similar envelope-stuffing ad in magazines and newspapers. That way, people will send money to you to learn how to make money stuffing envelopes. You, in turn, send them a similar letter about placing envelope-stuffing ads in other magazines and newspapers. In short, the way you earn money stuffing envelopes is by propagating the envelope-stuffing scam.

To conclude, let me just observe what these home-based business scams have in common: it's true that they lie, exaggerate, and misrepresent their products and services. That being said, the only reason they work is because people let themselves be carried away by delusions of "getting rich quick" or "making easy money." In other words, these scams, like all confidence games, feed off of greed and, in some cases, desperation. Don't be a victim. If it sounds too good to be true, it probably is. Remember that the only foolproof ways to increase your earning potential are hard work and education.

Get A Hold of Thousands of Dollars in Free Home Business Ideas and Tools