How to Avoid Coin Scams
Posted on January 11 2019
Collecting rare and valuable coins can be a fulfilling hobby and a form of investment. It offers a sense of fulfillment after finding a rare piece, and it can also help diversify your portfolio in order to have a buffer for inflation and economic downturn.
Being interested in valuable coins is not bad, but it can become dangerous if you start collecting and buying pieces without proper information. It’s important to be aware that scammers and fraudulent dealers are preying on coin collectors and capitalizing on schemes that can rob money from people.
In order to protect yourself from scams involving coins, you need to be armed with the right information about the coins you want to purchase, how to spot scammers, and how you can avoid falling for their schemes.
Types of Valuable Coins
There are two types of coins that collectors and investors typically look for, and these are bullion and numismatic coins.
Bullion coins are primarily purchased as investments. They are made of metals like gold, silver, platinum or palladium, and most of them are minted yearly. The value of bullion coins depends on their troy weight and metal composition. Examples of bullion coins are U.S. Gold Eagles, Canadian Gold Maples, and South African Krugerrands.
Numismatic coins, on the other hand, are rare and no longer produced these days. The value of a numismatic coin depends on its rarity, face value, and history. Examples of numismatic coins are Peace Silver Dollars, Swiss 20 Francs, and British Sovereigns.
Regardless of which type of coin you choose to buy or collect, both of them are valuable purchases, and you need to make sure that you’re getting the real deal and not just cheap counterfeits.
Why Catching a Fraudulent Dealer can be Tricky
Phony coin dealers are not located in obscure and dingy alleys, and they don’t appear the least bit sketchy. In fact, they dress the part and actually appear like legitimate coin sellers, which makes them hard to spot early on.
Fraudulent dealers have gone to a great extent in order to operate their schemes. Some phony sellers even set up offices in business districts and even hired staff to make it look like they’re running a legitimate business. Meanwhile, other scammers make false claims such as being the largest or finest coin dealers in the industry or having coin experts on board their team.
Another way false dealers attract coin buyers is through advertisements on major mediums such as newspapers and magazines. Others try to reach out directly to potential victims through telemarketing and sending messages via e-mail or snail mail. Meanwhile, some have gone to an extent where they build relationships with insurance agents and financial advisors in order to get referrals and target potential victims.
Spotting fraudulent dealers can be tough and challenging, because their schemes appear very legitimate. But the good news is, you can protect yourself from being victimized by con artists. Here’s how:
Ways to Avoid Scams Involving Coins
Here are ten things that you can do in order to protect yourself and your money from scams involving coins.
- Perform due diligence. Do your research on coins you want to buy or collect. Be abreast in the coin industry and prices of special metals. Read journals, join communities, and trust reliable sources only. Don’t invest unless you got all the information you need about the coin and the seller.
Research is your best ally in avoiding devious coin schemes and dealers. Before doing business with a coin seller, stay on your guard and always verify their claims.
- Take time to shop around. Comparison-shopping allows you to have an idea about the average price of a particular coin in the market. As a result, you will avoid overpaying for a piece or falling for too-good-to-be-true offers.
- Verify the grade of the coin. Scammers usually make false claims about the grade of a coin. Let an independent appraiser take a look at it to confirm the accuracy of its value and grade.
- Never rush into a purchase. It can be exciting to find a rare piece or add a new asset to your portfolio, but never ever be swayed into making a quick purchase. As mentioned, learn how to investigate. If you can, seek advice from professionals and experts that are in no way connected to the dealer.
- Determine what the dealer’s return policy is. Once the coin is in your possession, it’s advisable to have an independent evaluator take a look at it. It’s like getting a second opinion to know whether what you got is the real deal or not.
If the second assessment made you want to return the item, you need to know what the dealer’s return policy is. Will you be refunded or will it be up for exchange? Be wary of dealers who have vague return policies.
- Conduct a background check on the dealer. Know what people are saying about the dealer. Is feedback about them generally good or were they involved in disputes and suspected of being scammers? Meanwhile, not finding anything on a particular dealer can also be a red flag.
If a dealer claims to be a member of an organization, it’s best to get in touch with the group in order to verify if the seller is actually affiliated with them.
- Take physical possession of the coin you purchase. Don’t allow dealers to “safe-keep” your coins for you, because this is a common plot that scammers take in order to trick people into buying coins that don’t actually exist.
- Be wary of fancy packaging. Some scammers deliberately wrap coins in ornamental wrapping or excessive plastic to prevent buyers from examining a coin. It could be because the piece is a counterfeit or it is of lesser value than what the dealer claims.
- Be careful about giving important information to dealers. As much as possible, don’t disclose your credit card number, address, and other crucial information to dealers that you interact with on the phone or on the Internet.
- Know the truth about the Salomon Brothers Index. The Salomon Brothers Index used to monitor the annual performance of rare coins. Their findings found that some pieces increase in value by 12 to 25 percent per year. However, this index didn’t speak for all coins because it only tracked 20 rare coins.
Some fraudulent dealers skew this index and claim that the piece they’re selling will increase in value overtime.
Common sense and due diligence are your best defense against coin scammers. Whether you’re planning to collect coins as a hobby or as an investment, this article is a handy guide that you can use to keep fraudulent dealers away from you and your money.