Gift Card Fraud

Be careful when selecting gift cards for your friends and loved ones. Crooks have learned how to exploit this popular form of gift-giving through tampering, trickery and outright theft.

Even when the Holiday season is over, gift card sales are a year round business for many retailers. Because of this we want to bring gift card scams to your attention. These scams can drain the value right out of your card before you get to use it.

“Card Not Present” Scam

The first, and rarest (although it does occur) of these is called the Card Not Present or “CNP” scam. Swindlers record the numbers on cards offered for sale, then periodically check to see if the cards bearing those numbers have gone “live”. By “live” we mean that the cards were sold, activated and had a monetary value added to them. When they find cards that have, they use them to make online “card not present” (aka “CNP”) purchases. Using the gift card this way allows the scammer to drain them of their cash values before their intended recipients can use them.

This doesn’t work on all gift cards, however, just the ones allowing “card not present” situations such as online transactions. While a scam artist can in many cases easily physically access gift card numbers by prying the card from its packaging and putting it back once the number is written down, it’s not not easy to hide the fact that the cards’ PIN number is now visible. Once the covering has been scratched away it can’t be put back. Ironically, the packaging itself can conceal that the card has been tampered with.

If you then purchased one of these cards, the fact that it had been tampered with and its PIN number coating removed might go undetected until its recipient attempts to use it! Many people don’t understand the importance of the PIN number anyway, so a scratched off PIN coating might not raise any alarm. We suggest that consumers only purchase cards stored in secure locations that make tampering difficult. We can’t let that piece of advice go without letting you know that store clerks have also been known to engage in this scam. So purchasing gift cards stored under lock and key may reduce your chances of being ripped off but it won’t guarantee protection from this scam.

Whether you choose a gift card from a store display or have a clerk hand it to you, always take the time to examine both side of the packaging before paying for it. Better yet, remove the packaging before you leave the store. If you can see the PIN number or detect signs of tampering, don’t pay for the card or ask for another. Let the store’s management know why. If the card can’t be used for online or “card not present” purchases you don’t have to worry as much because the thief would need the card in hand to use it.

Overstated Value Scams

Another, more common form of gift card fraud, is when a reseller overstates the values of the cards they’re selling. Yet another involves thieves using stolen credit cards to load gift cards which they turn around and sell for cash.

Other ways gift cards have been abused by criminals:

• Employees at stores where gift cards are sold steal them from their displays, activate them with store scanners, then go on shopping sprees. Sometimes they use the stolen cards to purchase new cards to launder their stolen merchandise.
• Thieves pretending to be customers engage in sleight of hand by swapping blanks (previously stolen) for new cards activated by clerks during a sale, then change their minds and cancel their purchases. The clerks are clueless because they think they got the new cards back and the thief walks out of the store with the new card in their pocket.
• Stolen cards can end up on auction websites where the unsuspecting bid on them to get a good deal. The National Retail Federation advises consumers to only buy gift cards online from a reputable dealer and never through an online auction because what you bid on may well be a stolen or counterfeit gift card.
• Crooks will carefully slit open bar code-bearing gift card packaging to remove new, unsold cards and replace them with cards that have had their funds drained. When these “empty” cards are sold, the activation of the packaging’s bard code loads the real card (in a thiefs possession) with the funds. Imagine the fun when the card’s recipient attempts to use the card.

How to avoid gift card scams

• Only purchase gift cards from reputable sources. Better yet, get them directly from the store they’re from.
• Don’t assume that if a store has gift cards under lock and key it means they haven’t been tampered with and their numbers accessed. Carefully examine both sides of the card and look for signs of tampering such as an exposed PIN. If you find anything questionable, ask for another card and check it out, too. Repeat as many times as necessary.
• Online gift card purchases should be made from the website of the retailer they are intended to be used at. Never buy them on auction sites even if it looks like a great deal. Remind yourself that these cards may be stolen or counterfeit.
• Keep your receipt as proof of purchase until the cards value has been exhausted. If you lose the card you may be able to show a casier at the retailer your receipt and have them issue you a new gift card. Not every retailer will do this but many will. It’s worth asking.
• Have your cashier scan the card at the time of purchase to ensure that gift card you buy is valid and has the correct balance.
• Remember that no reputable business will require you to provide your social security number, bank account information or date of birth in order to purchase a gift card. Asking for this kind of personal data is unnecessary and has nothing to do with purchasing a gift card. You’re not applying for credit.
• Register the gift card if that service is offered.

More on Gift Card Scams

• Credit Card Fraud