Know what to look out for when you have a gift card
Gift cards are getting increasingly popular. Many retailers and restaurants have their own gift cards. Retailers often provide store credits by providing a gift card. Other gift cards, like the American Express Gift Card and Visa Gift cards are accepted widely across many types of merchants. Gift cards are expected to be used in around $70 - $100 billion of transactions in 2006. Fraudsters are catching onto the concept of gift cards. Credit Card fraudsters are moving in to gift cards. While a credit card is easy to track and shut down, it’s more difficult to keep track of a gift card as the purchaser is usually not known. Often, fraudsters will use a stolen credit card to buy gift cards that they can sell for money. Gift card fraud affects even large retailers with sophisticated systems, like Walmart, Target and The Gap.
Blank Cards
Gift cards offer an easy way for a store employee to fraud a customer. An employee could sell a customer a gift card for a certain value, but give them a blank gift card with no value.
This is sometimes achieved by keeping the card that was loaded and giving the customer another card. If the card uses a barcode instead of a magnetic stripe, the employee may place a second card over the customer’s card and then scans the second card. The employee keeps the gift card that was scanned. Sometimes, the employee unplugs the register when making the sale. This way the card can be activated, but there is no record of the sale. The employee pockets the cash.
Protect Yourself: Always get a receipt. If the receipt shows the card number, make sure it matches the number on your gift card. If the gift card number is not shown on the receipt, try calling or swiping the card to check the balance on it.
Oops! There’s no money on your card
Another trick store employees throw on customers is to tell them that there is no value left on the card even when there is. The employee will keep the card and use it later.
Protect Yourself: Ask for the card back and check the balance. You can call customer service to get the balance, or, if the store provides it, there maybe some readers in the store that can tell you the value left on your card.
Swipe and Swap
Another scam is to swap your card for another with no value when you make a transaction. The clerk at the cash register takes your card, but gives you back a different one with no value. Your card, with value, is now with the clerk. This is even more difficult to watch over at restaurants, where the waiter or waitress takes your card away in order to charge it.
Protect Yourself: Try to remember your card number and make sure you get the same one back. If you’re standing across the counter, watch the card carefully to make sure it isn’t swapped.
Sell, Squeeze and Ship
Gift cards can be bought online at a discount. $100 gift cards can be bought for $70 at sites like eBay or CardAvenue. You may even be allowed to verify the value on the card before you complete your purchase. The seller may squeeze out some of the money on the card by using it before he ships it. At the end of the day, you may have paid $70 for a $100 gift card with only $50 left on it.
Protect Yourself: Buy directly from a retailer or bank as far as possible. If you’re buying from someone you don’t know be very careful, especially when the card is being sold at a big discount. Some websites provide a guarantee on the transaction. Purchasing the guarantee can help you from being scammed, but they are expensive.
Cashing out a stolen credit card or stolen merchandise
Credit card thieves need a way to make money out of stolen credit cards without getting caught. They’re turning to gift cards as a way to do that. The thief uses a stolen credit card to buy a gift card and then sells that gift card online at a discount. A prominent retailer found that 80% of their gift cards sold on eBay were fraudulent.
Stores often provide credit on a store gift card if merchandise is returned without receipt. Thieves return stolen merchandise and get a gift card which is then sold online.
Online sites like eBay are putting in fraud control measures like limiting the maximum number of cards a person can sell and the value of these cards.
Protect Yourself: Again, buy directly from a retailer, a bank or from someone you know. If you’re buying from someone you don’t know be careful. Purchasing the guarantee for online transactions can help you from being scammed, even though they are expensive.
Mag-Stripe Skimming
Gift cards are often on display in stores. When they are on display they don’t have any value. Thieves steal these cards or take them to a corner of the store or to the restrooms and use a relatively inexpensive device to copy the magnetic stripe onto another card. They then return the cards to the display. The thief keeps track of the value on the card by calling up the toll free number. When the card is purchased and has some value, they then sell or use the card that they made.
Protect Yourself: Look for cards that have PIN which is revealed only when the seal is scratched off. Thieves cannot get the PIN without removing the seal, so they won’t target these cards.
Besides these scams, which are quite specific to gift card, some credit cards scams work also on gift cards. Gift card numbers, like credit card numbers, are stolen and sold. They can even be skimmed and cloned just like credit cards.
Despite these relatively simple scams that gift cards are susceptible to, they make great gifts. Most gift cards also allow customers to report them lost or stolen and get replacements. Like with credit cards, some retailers will provide credit if value was fraudulently taken off a card.
Gift cards are here to stay. They are good for the customer and have a very profitable model for retailers. Just as we’ve all learned what to look out for when using a credit card or buying online, we’ll have to learn how to use gift cards safely.
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