This Season, Beware Gift Card Fraud

Everyone loves gift cards! I know I do, especially during the holiday season. Gift cards are the most frequently purchased items this time of year. Not only do they make great stocking stuffers, but many people request them as holiday gifts. In fact, the National Retail Federation estimates over 31 billion dollars in gift cards sales this holiday season alone! Unfortunately, the convenience and ubiquity of gift cards make them a prime target for crooks.

Holiday Hang-up: Gift Card Fraud

Some folks have already become victims of gift card fraud this holiday season -- including a friend of mine. He purchased a $50 gift card from a major retailer for his nephew's birthday. A couple of days later, his nephew tried to use the card to purchase something in a store, only to find it declined. The card had a $0 balance. Upset, my friend went back to the retailer with receipt in hand to get the situation fixed. The retailer said the card had been used and there was nothing they could do. Truly, what could they do? The history showed that the card was purchased then used. How could this happen?

Like credit cards, gift cards each have a unique number and, like most debit cards, a PIN for unlocking them. Gift cards are often displayed out in the open, on racks so customers can easily access them. Using a scanning device, or simply pen and paper, an enterprising criminal can record gift card numbers. The PIN is usually located on the back of the card beneath a scratch-off surface; thieves scratch off the silver, record the number, and put the card back. Unfortunately, too many customers purchase cards without checking whether the PIN has been compromised.

Once you purchase (thus activating) the card, it typically sits wrapped up until given on Christmas. With the PIN and card number in hand, the criminal simply dials the 1-800 number for checking a card's balance every few days to see if the card's been purchased. Once activated, the criminal goes online and spends the balance. This goes unnoticed until the actual owner of the card attempts to use it, sometimes weeks or months later. This is what happened to my friend; the PIN had already been scratched off the card, the money spent, and they'd been none the wiser. What a rip-off!

How to Avoid Common Gift Card Scams

There are other gift card scams. For example, some websites sell discounted gift cards, and you can even find people hocking them on eBay and Craigslist. These cards are often counterfeit. Alternatively, unscrupulous sellers will keep track of the number and PIN and, like someone did to my friend's nephew, call and check for the card to be loaded with funds.

But none of this changes the fact that gift cards are fun and popular gifts. If you're buying gift cards for your loved ones this year, here are some tips to help you avoid fraud.

Don't purchase gift cards from online auction sites. This is a major flag for gift card fraud. If it sounds too good to be true, it probably is.

Buy your gift cards directly from trusted retailers. If you want an Old Navy gift card, buy it from Old Navy. These often need to be purchased directly from the cashier, handed over the counter, so they're less likely to be tampered with. Other major retailers carry a variety of gift cards, and these are usually safe as well.

Don't buy loose gift cards from a publicly displayed rack. Often, you can request a gift card that has not been opened or displayed, but not always. Fortunately, gift card packages have become more secure, using cardboard and plastic to protect the card's numbers from showing. Use your best judgment when examining gift cards on a rack.

Double check the card before leaving. If the package looks tampered with, don't buy it. If you can see the PIN on the back of the card through the package, don't buy it. When you get to the register, you can take the card off the package in front of the cashier to make sure the PIN has not been scratched off and that the numbers on the package and the card match.

Always keep the receipt. If you lose or damage the gift card, many retailers can issue you a new gift card loaded with the remaining balance.

Treat the card like cash. If you get a gift card, use it quickly. This helps prevent fraud and loss.

Do you like receiving thoughtful gift cards during the holidays? Do you enjoy buying fun gift cards for friends and family? There's no reason to let fraud dissuade you from giving and using them -- but a little smart observation and preparation will go a long way in protecting and preventing gift card fraud this season. Stay aware, and enjoy your holidays :)

Want more tips for protecting your family against digital fraud? Wondering how Bask can help you enjoy technology comfortably and confidently? Call us today for a free question & answer session, or schedule one here: Speak with a Bask Technology Advisor