These Fintok Tips Could Leave You In Legal Trouble

A recent study by Barron’s found that one-third of Gen Z-ers get their financial advice from TikTok. While this is great for keeping teens updated on current trends and answering common questions like “is debt normal?” (it is) and “what’s a ‘good’ credit score?” (around 730), it’s essential to be mindful of the legal risks involved with using social media for financial advice.

Many “money gurus” on social media have good intentions but don’t fully understand the legal implications of their advice. Here are five popular financial tips we’ve seen on TikTok that could land you in a lot of legal trouble.

1. Focusing on repaying your smallest debt only

The debt repayment strategies known as the “Snowball” and “Avalanche” methods have existed long before social media and are legitimate ways to get rid of outstanding debt. However, many FinTokers fail to follow through on explaining the entire strategy to their viewers before recommending it. This can lead to consumers taking on more debt than they can handle and not understanding that they must pay all their debt obligations every month, not just one at a time.

2. Canceling your credit card before the annual fee is charged

Credit card flipping is a popular method for maximizing the rewards points you can get by opening new cards, putting the minimum spend on them, and converting the rewards points to gift cards or free travel. Some TikTokers will advocate for getting the points, converting them, and then canceling the card before the annual fee’s refund grace period is over.

However, this strategy comes with risks that can get your points “clawed back” by the credit card company, leaving you on the hook for thousands of dollars in fees and potentially high-interest rates. If you can’t pay back your financial obligation (check your credit card terms and conditions for specifics), you could wind up being served a legal summons to appear in court or have your account sent to collections.

3. Messing with your credit reports

Many FinTok gurus think they have “hacks” for improving your credit score by messing with your report. One TikToker advocated for removing your current address from your report as a way to remove any negative information tied to your credit activities.

While this also does damage by removing the positive things in your credit score, credit bureaus won’t remove information that’s true and accurate. Also, doing this intentionally could be considered fraud by some jurisdictions, which can carry heavy fines and potential jail time.

4. Using tax breaks to reduce your taxable income

Many FinTokers make the mistake of recommending tax breaks that only apply to certain types of income or taxpayers. For example, one popular video recommends using a 529 college savings plan to reduce your taxable income. However, the plan doesn’t apply to most people, and using it without being qualified could land you an audit from the IRS.

5. Using state financial rules in the wrong state

Many financial tips carry a lot of nuances that can be fine in one state and totally illegal in another. You’ll often find advice on TikTok regarding utilizing statutes of limitations to get out of debt. However, in some states, such as California, these statutes of limitations don’t apply to personal debt. This could get you into deep financial trouble simply because you didn’t understand the differences between the laws in your state and the one you’re trying to exploit.

The bottom line

While TikTok may be an excellent resource for tips of all kinds, “hacking” your finances with FinTok tips is a poor way to manage your money and could land you in further debt or even legal trouble if you do it wrong.