Starting a Side Hustle Should Come With a Warning Label — Here's What You Need to Know Not everyone who starts a side hustle will be successful — some unlucky individuals might find themselves even worse off than they began.
By Amanda Breen Edited by Jessica Thomas
Key Takeaways
- More than a third of American adults have a side hustle — an effective, flexible way to earn additional income.
- However, those who neglect a few critical steps might end up losing more money than they make.
More than a third (36%) of adults have a side hustle — and 32% of them believe they'll always need them to make ends meet, according to a Bankrate survey.
Although side hustles can be an effective, flexible way to earn some extra cash, starting and running them successfully isn't always easy.
That's especially true in an era when online scams are rampant and increasingly sophisticated.
Nearly half of Americans (48%) believe that the rise of AI has made them less "scam-savvy" than ever before, per a recent survey commissioned by BOSS Revolution and conducted by Talker Research.
Buyers aren't the only ones who need to beware; side hustlers selling goods and services online are also prime targets for fraudulent activity.
Dennis Paderson, CEO of payment service platform FastoPayments, cites five common scams that target online sellers: phishing scams, chargeback fraud, return fraud, merchant fraud and wire transfer fraud.
With phishing scams, fraudsters deceive people into sharing sensitive information, like credit card details and passwords.
Some warning signs include "unexpected requests for personal information, spelling and grammar errors, unknown or suspicious senders, and a sense of threat or urgency in the correspondence," Paderson says, noting that recipients should avoid clicking any unfamiliar websites and downloading attachments they don't trust.
Chargeback fraud occurs when a customer makes a purchase with their credit card, then disputes the legitimate charge with their bank.
"Good communication is key to preventing friendly fraud," Paderson says. "It's important that online businesses put merchant names and transaction details in banking apps to avoid customer confusion and that email confirmations are sent promptly after purchases are made."
Sellers should track packages and provide delivery updates, he adds.
Related: We Are in an AI Arms Race. Here's How We Can Beat AI Bots and Fraud.
Like chargeback fraud, return fraud is when a customer tries to get a refund by manipulating the seller's return process, perhaps sending back a different item or taking undue advantage of the return policy.
"Sellers should develop and share clear, non-negotiable return policies and always follow them while processing returns," Paderson says. "For example, items not returned in their original condition, without attached labels or that appear to be used should not be refunded."
Sellers should conduct checks to ensure customers receive and return the correct item in the required condition and track deliveries to guard against fraudulent lost order claims, according to Paderson.
With merchant fraud, scammers present themselves as legitimate businesses to trick their customers and make illegal profits.
"A major way that businesses and sellers can combat this is by ensuring that the company name, logo and transaction details appear on bank statements to distinguish legitimate purchases from fraudulent transactions at fake stores, preventing chargebacks," Paderson says.
He also recommends implementing clear terms and conditions, secure payment methods and multi-factor authentication.
Related: Is That Side Hustle a Scam? Here Are Four Questions You Need to Ask.
Wire transfer fraud is when a fraudster (often impersonating trusted individuals and organizations) tricks someone into sending money through a bank transfer.
"As a rule, sellers should never send money in an unplanned, unexpected manner, and transactions should always be approved by multiple people," Paderson says.
Businesses and employees shouldn't share private company information with third parties, he notes, and improved cybersecurity protocols, including strong passwords and multi-factor authentication, can also be an effective safeguard.
