Chain Letters and Pyramid Schemes - Why They Don't Work

If you are active in mail order, you've no doubt seen tons of chain letters and pyramid programs. In case you're not familiar with them, here's an overview, so you know what to watch out for.

Chain letters are those letters you get, instructing you to send, say $5, to the 4 to 6 people on the list, who will send you a report, or some product, or sometimes even nothing. Then, you add your name to the bottom of the list, moving the others up, and the top one off.

You then print and mail out as many as you can, hoping others will do the same as you. The letters are liberally sprinkled with references to how much money you will make, and how many people are sure to participate. Some even go so far as to promise you $1,000,000 and more, sometimes in less than a month!

Pyramid schemes are what chain letters are based on. You buy into one, then you need to recruit others below you, to move you up the line. The people you recruit, in turn, need to recruit others, and so on. Pyramids go by all kinds of names and formats.

For example, "Airplanes" are a popular pyramid scheme. There are 8 "passengers," 4 "stewardesses," 2 " co-pilots," and 1 "pilot." When you buy in, you pay a predetermined amount, like $10, to the pilot. That makes you a passenger.

When you recruit 8 more people, you become a stewardess. Your 8 people then need to recruit 8 more, to move you up, and so on. You're promised that you will get hundreds of dollars when you're the pilot.

These programs all share many characteristics.

First, they're illegal. Don't believe what the chain letters say, that someone "showed it to the postmaster, who assured him it was legal," or "it's legal, check the postal codes."

Pyramid games are illegal because you're paying money for nothing, in a shaky con game which can fall apart if recruiting drops off. With a chain letter, it's the same, but it's conducted through the mail, which opens up mail fraud laws, also.

Second, the mathematics used in the letters and schemes is flawed.

Most chain letters will say you should expect a 5% - 10% response from your mailings. As anyone in mail order will tell you, this is absurd, especially in regard to chain letters.

But, let's go with a 5% response on a chain letter with six levels. For the sake of argument, let's say that everyone who participates mails out 2,000 copies (though most people drop out without mailing more than a few).

What you are doing in a chain letter is relying on others to do the work that will make money for you. There is no such thing as free lunch. Somewhere along the line, people will drop out and everybody loses!

It doesn't matter if the chain letter/pyramid involves sending money, recipes, stamps, or any product or object of value. It's still ILLEGAL and a poor business proposition.

Related Articles

A Short Course in Mail Order Fraud

When the mail is used to intentionally misrepresent a product or service it constitutes Mail Fraud. The U.S. Postal Inspection Service is charged with investigating violations of the law, usually in response to consumer complaints.

The Free Credit Card Trap

They arrive in your mail - a conspicuous looking mail piece from some "official looking" bank claiming that you have been Pre-Approved for a MasterCard or VISA credit card.

Envelope Stuffing Scams

It seems like every mail order publication has at least one ad in it promising hundreds of dollars a week, just for stuffing envelopes. Some even promise to pay $4 or $5 per envelope stuffed!

Examples of Mail Order Scams

After spending the last few months investigating certain types of mail order businesses, it was obvious that some of them were borderline questionable, if not a verifiable scam.

What to Do when You're a Crime Victim

The 911 telephone system is standard nationwide to enable callers to reach emergency services by phone with a minimum of difficulty. If you have an emergency involving the safety of life or property, you are encouraged to make use of the system.

Swindlers are Calling

But wherever honest firms search for new customers, so do swindlers. Phone fraud is a multi-billion dollar business that involves selling everything from bad or non-existent investments to the peddling of misrepresented products and services.

Beginners Take Notice

Would you send Sears $20 and expect them to know you were ordering without you specifying it in your order form? Would you send your electric company a check for $15 and expect them to know what account you were making a payment on?

Hidden Truths about Legitimate Scams

What's a legitimate scam? It's a scam that delivers the product or service it claims to but the customer is still left with nothing!

Big Mail Order Scams Explained

No matter how hard anyone tries, mail order scams existed in the past, they exist now and they will continue to exist into the future.

Popular Con Games and How to Recognize Them

The object of any con game is to cause you to part with your money or other thing of value. Most con games are initiated by people who approach you on the street or call on you at your home.