Zelle scams are on the rise because convenience breeds popularity, and that popularity is an opportunity for scammers.
To give you an idea of Zelle’s popularity, in 2023 alone, consumers and small businesses sent 2.9 billion transactions totaling 806 billion dollars—a scam goldmine.
This post provides an overview of Zelle and how it works, a rundown of some of the more common Zelle scams, and tips on how to avoid them.
Let’s start.
What is Zelle?
Like Venmo and PayPal, Zelle is a peer-to-peer (P2P) payment system through which a business or individual can send money to other companies without incurring fees. The funds are usually transferred within minutes.
The service is owned by the following banks: Truist, Bank of America, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo, but many more financial institutions in the United States support it. You can likely sign up for Zelle through your bank. However, if you can’t, you can still install the app and sign up from there.
Zelle uses the Automated Clearing House (ACH) payments system to transfer funds between U.S. bank accounts. In simple terms, ACH enables banks to send money to each other electronically. If your employer pays you through direct deposit, that’s done through an ACH payment. While you could make ACH payments through your bank, that would take days. With Zelle, the funds only take a few minutes to reach your recipient. It’s indeed fast and convenient, explaining the service’s surge in popularity.
Zelle uses peer-to-peer architecture. P2P payment apps don’t have the same safeguards as credit cards. Using P2P to transfer money is more akin to using cash because transactions are instantaneous and often irreversible.
P2P payment apps have to deal with scammers who will try to exploit any loophole in the system. Zelle, as we will see, is no exception.
Most common Zelle scams
Most Zelle scams you’re likely to encounter can be grouped into one of five categories.
- Impersonation scams
- Seller scams
- Advance-fee scams
- Reimbursement scams
- Phishing scams
We’ll review each of them, providing examples and mitigation tips.
Impersonation scams
As their name indicates, impersonation scams involve malicious actors impersonating someone you know or should recognize. This could be anyone from a family member or friend to a representative from Zelle, your bank, or any other business with which you used Zelle for payment.
Regardless of who is impersonated, they will state a legitimate reason for you to send them money through the app. Your nephew is stranded in an airport and needs fast cash through Zelle to buy a ticket home. Or a Zelle representative calls, informing you that you need to send money through Zelle to yourself to cancel a fraudulent withdrawal. The attacker creates an emergency to trigger an emotional reaction and short-circuit your rational thought processes. The rise of AI (voice cloning) makes these impersonation attacks easier to pull off and more convincing.
Whatever the pretense, the idea is to convince you to send the impersonator a Zelle transfer. And when you do, the money is transferred to the attacker rather than the intended recipient. Obviously, you shouldn’t.
Mitigations
To avoid these kinds of scams, remember that neither Zelle nor your bank will ever call you and ask you for money. If you get such a call, hang up and call your bank or contact Zelle to confirm the situation. You can do the same thing if it’s a third-party business: hang up and contact the company directly.
If the attacker is impersonating someone you know, ask them a question only the actual person can answer.
It’s critical to keep your cool and not panic in the face of this manufactured emergency. By following the above advice, you’ll know soon enough whether the emergency is real or imagined.
Seller scams
This one is highly prevalent. An attacker places an ad on Facebook Marketplace, eBay, or any other online service and collects your Zelle payment for goods that never come. This one is as old as the dawn of time, but with Zelle payments being near instantaneous and irreversible, it’s getting a shot in the arm.
One such seller scam gaining traction is the “beautiful apartment for rent at an improbable price – we just need a deposit (via Zelle), and it’s yours” scam. You guessed it: as soon as the transfer is complete, you never hear from the seller again, there is no apartment, and the ad disappears.
Mitigations
Typically, the item’s price or stock levels (only one left – act fast!) creates a sense of urgency. That urgency is an attempt to trigger an emotional response.
Please don’t fall for it.
If it sounds too good to be true, it probably is, as they say.
Only make purchases from vendors you trust. Don’t send money to strangers. If you’re buying used goods, meet the seller in person or use a password-protected money transfer system (many banks offer the ability to protect a funds transfer with a password or security question). Only share the password or answer once you have the goods.
Advance fee scams
It’s become a bit of a meme, but do you remember the Nigerian prince email scam from the late ’90s? It goes like this: You receive an email or WhatsApp claiming to be from the prince of Nigeria, who explains that, following his father’s death, he’s been locked out of his fortune. And now, for some unknown reason, he needs you to send him money to access his vast troves of money. Once that happens, he will lavishly reward you for your assistance.
Sounds likely, right?
That’s an advance fee scam. You pay the advance fee with the promise of a reward that never comes.
More convincing varieties, at least by today’s standards, of advance fee scams exist. One you may be familiar with is the “contest you won though you weren’t aware you entered” scam. And to claim your prize, you need to pay this or that fee. Of course, when you do, your prize is as elusive as a Nigerian prince.
Mitigations
Be wary of the lure of profit. Legitimate profit doesn’t randomly appear in your mailbox (or inbox).
Don’t pay for promises. Someone asking you to pay in advance for any financial assistance is probably not on your side. It’s also advisable to do a web search on the person or business asking you for an advance fee using the words “scam” or “complaint” and see what results you get.
Reimbursement scams
Reimbursement scams are a type of impersonation scam because the person calling pretends to be someone they’re not—usually a representative from your bank or Zelle itself. However, reimbursement scams are so common that they merit their own section.
This one typically goes something like this: you get a phone call from a bank representative who tells you that you’ve somehow lost money in the form of a suspicious Zelle payment you know you didn’t make. The rep then guides you through a convoluted and utterly fake Zelle recovery process.
What you’re actually doing is sending money to your attacker.
Mitigations
Hang up with the caller and contact your bank or Zelle directly to confirm the situation. Even if it turns out to be true (which is a very long shot), doing so won’t incur further financial loss, and you’ll still be able to address the situation with your bank.
As with all these scams, don’t cede to panic.
Phishing scams
It may appear strange to list phishing scams here because, well, aren’t all of them? They are. But they all have their little particularities that merit fleshing them out.
Within the context of Zelle scams, a phishing scam will be a scam in which the attacker attempts to trick you into clicking a link that enables them to steal your credentials. This can be through installing malware or directing you to a fake form controlled by the attacker. Whatever method is used, the point is that the attacker gets your Zelle credentials, which they then use to access your funds.
A variant of this attack gains traction yearly as the holidays approach: the “missing package” scam. It goes like this: You receive a text message claiming that you have a lost package that may be retrieved if you fill out a form accessed through a provided link. The form and website are fake and under the attacker’s control.
Please keep your eyes peeled for this one, as it’s about to peak.
Mitigations
Don’t click links in emails or text messages unless you explicitly trust them and the sender, especially if you’re not expecting any packages. Driver scams are prevalent during the festive period.
If you are expecting a package, contact the company you purchased from and confirm with them that there’s indeed an issue with your delivery.
Take a good look at the sender’s email address or phone number. If it doesn’t look legit, it probably isn’t. Be on the lookout for spelling mistakes and poor grammar – two hallmarks of scam emails and messages.
General advice to help avoid Zelle scams
While there may be some overlap between them, the above tips are specific to each type of Zelle scam. However, some general tips apply to all scams and should be kept in mind.
- Only use Zelle (or any other P2P payment system) with people you know and trust. That way, out of the blue, emergency requests from third parties will immediately appear suspect.
- Be wary of time-constrained emergencies. Your bank or Zelle don’t have a 30-second timer, after which they’ll refuse to help you. That tactic elicits an emotional response and bypasses your rational thought processes. Please don’t fall for it.
- Don’t trust merchants that insist on only using Zelle. That’s a red flag.
What to do if it’s too late (you’ve been scammed)
Hopefully, you’ll be able to avoid falling victim to a Zelle scam. But, if you don’t, here’s what you should immediately do.
Alert your financial institution/Zelle
If you’re using Zelle from your financial institution’s website, contact them as soon as you know you’ve been scammed. The customer service telephone number is printed on the back of your debit or credit card. If you enrolled through the Zelle app, contact Zelle to inform them of the scam.
Lock down and set up alerts on your financial accounts
You want to treat a Zelle scam as if your credit card number was compromised. Lock down your account. That usually means putting your account under more scrutiny by your bank, such as receiving text messages to approve purchases.
You can also change your online banking account username and password and request a credit freeze from the credit bureaus.
Alert the police
While it’s unlikely law enforcement will open an investigation, filing a police report will nonetheless create a record of the event, which can be helpful if any additional fraud or identity theft occurs further down the line. You may as well have your bases covered.
Related: Best identity theft protection services
Wrap up
So that’s the lowdown on Zelle scams. They can be pretty nasty due to Zelle’s proximity to cash payments. Like cash, Zelle payments are instantaneous and irreversible. It shows that sometimes, a service’s flagship features can also be its Achilles heel.
Still, Zelle is pretty convenient and should be safe to use with vigilance and common sense.
Stay safe.
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