MLMs and Pyramid Schemes: How to Protect Yourself

by Jan 30, 2023Bad Credit0 comments

Are you familiar with direct sales? You buy into an inventory and sell the product while signing others up to sell, often receiving a sign-on bonus for each person in your direct line. However, as attractive as these ideas are, they can also be problematic. Also known as Multi-Level Marketing or pyramid schemes, these arrangements can be predatory and, in some cases, even illegal. Here’s what you should know.

What is an MLM?

You may hear the term multi-level marketing when learning about direct sales. Not all direct sales jobs are MLMs, but many are. MLMs encourage members to sell products and also recruit new people into the company. In most cases, a person in an MLM will need to purchase and then resell their inventory and are encouraged to buy new products in bulk to sell. The buying, selling, and recruiting cycle continues down the line, creating more revenue for the people higher up.

How is it Different from a Pyramid Scheme?

MLMs are legal, but many illegal operations run as pyramid schemes, which use the same downline techniques to recruit and sell. A pyramid scheme is a fraudulent venture, often with the promise of revenue for downline individuals that never manifests. It’s still only the people at the top who make money off the recruitment and sales promises of the people below them in the pyramid.

How to Recognize a Scam

While MLMs are legal and, in many cases, legitimate, they often get lumped in with less scrupulous business ventures. It can sometimes be challenging to tell the difference. Most target women, especially mothers, to make additional money for the family. Legitimate MLMs, such as Avon and Tupperware, have long been around. But there are a lot of scams and pyramid schemes that target the same demographic, so it’s essential to be cautious so you don’t find yourself on the hook financially.

The signs include:

  • No or low-quality products or services
  • Product claims too good to be true
  • High-pressure sales tactics
  • Pressure to buy inventory
  • Poor communication and unanswered questions from people higher up
  • Expensive training or buy-ins
  • Deceptive advertising that makes it look like a traditional job
  • Trusting your gut if something feels off

Legitimate Fulfillment Jobs for Making Extra Money

Having a side hustle is a tried and true way to make extra money to pay off debts. But it’s important to avoid scams that could cost you more money in the long run. Your determination of what is or isn’t a reputable MLM may differ, but some have solid track records with few red flags. It’s important to note that “most profitable” isn’t always a good indicator of whether you will see any of those profits. However, Avon has been around for a long time and has remained successful. Pampered Chef is also a currently popular direct sales company. 

Learn how to avoid MLM scams and pyramid schemes here.

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A message from Dale Marco:

Hi all, Dale here. I want to let everyone know that I work with credit monitoring partners as an affiliate seller. I make a commission when you sign up for these services, but I wouldn’t recommend just anyone. These are organizations I trust and use myself. My goal with my blog is always to educate, but it’s also part of my business, and I receive compensation when you use the products I recommend.

Dale Marco

Dale Marco


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