How to avoid work-at-home scams

For a parent, it sounds like the best of both worlds: working from home so you can make money AND spend more time with your kids.

The lure of work-at-home companies is especially enticing at a time when many moms can't afford not to work anymore and some may even need a second source of income.

The so-called opportunities scream out from all over: ads promising you'll rake in big bucks by stuffing envelopes or being a "mystery shopper," or by hosting parties to hock cosmetics, cookware, jewelry, even sex toys.

But how do you know what's legitimate and what's a scam?

In a National Consumers League study released this year, 31 percent of Americans surveyed said they are more likely to look at work-at-home opportunities because of the economic downturn.

And more scammers than ever are out there looking to take advantage.

"Work-at-home opportunities are attractive to scammers because scammers have easy access to the Internet, job postings, even the classifieds in newspapers," said John Breyault, vice president of public policy for the National Consumers League. "There are a lot of pyramid schemes out there masquerading as multi-level marketing."

The big difference between the two, he said, is while multi-level marketing companies such as Amway and Mary Kay offer legitimate products for sale, pyramid schemes offer nothing but promised compensation for recruiting others.

Take the old envelope-stuffing scheme that has been around for ages, Breyault said. Recruits are encouraged to place ads to lure others to pay a fee and in turn, place their own ads. No products are ever sold.

Neil Offen, president of the Direct Selling Association, a national trade association based in Washington D.C., said there are two questions you should ask before venturing into business with a direct-sales company:

1. Do you risk financial loss by being involved with the company? "If you have to buy anything, ask, 'Will you buy this back, and at what price?' "

2. Is the money you're making coming from the sale of a product or from recruiting people?

"If it's from recruiting people, it's a scam," Offen said.