Scam: Thieves make note of the identifying information displayed on gift cards being offered for sale, then periodically call to check if they've been activated, and when they are, they drain these cards of the amounts they contain.
Status: Real fraud which typically costs its victims between $25 and $500.
Example: [Collected via e-mail, 2006]
Just a little warning before traditional gift giving time.
Well the crooks have found a way to rob you of your gift card balance. If you buy Gift Cards from a display rack that has various store cards you may become a victim of theft. Crooks are now jotting down the card numbers in the store and then wait a few days and call to see how much of a balance THEY have on the card. Once they find the card is "activated", and then they go online and start shopping. You may want to purchase your card from a customer service person, where they do not have the Gift Cards viewable to the public. Please share this with all your family and friends...
According to the alert of the moment, unsuspecting consumers are being defrauded of the values housed in gift cards they purchase off the rack in stores. Swindlers make note of the numbers displayed on cards being offered for sale, then periodically
check to see if these numbers have gone live; that is, that the cards bearing them have been purchased and loaded with monetary values. When they find ones that have, they use them to make online ("card not present" aka "CNP") purchases and so drain them of their cash value before their rightful owners attempt to use them.
We're not sure how seriously to regard this warning. Some retail and law enforcement groups have suggested that although the type of gift card fraud described above has been known to occur, it's relatively rare, and fears of gift card theft are greatly exaggerated. They say more common types of gift card fraud are resellers' overstating the value of the cards they're offering, and thieves' using stolen credit cards to purchase gift cards which they turn around and sell for cash.
Certainly the warning being circulated in e-mail (which was issued by the Jackson County [Oregon] Sheriff's Department as a
While a value drainer could in many cases acquaint himself with an unpurchased card's number with great ease simply by looking at the back of the card (prying it from its cardboard base if necessary and then repositioning the plastic neatly back onto its placard), he could not easily conceal that he'd been at the PIN incumbent to the card, a key piece of information he would need to have if he were to use the card online (aka in "card not present" situations). Many retailers who have been hit with gift card fraud have come to require that a specific PIN be keyed in along with the card's number in situations where the card itself is not being handed to a clerk. Said PIN is obscured on the card's back in a manner that requires a covering be scratched away to reveal it.
However, the thief's act of replacing the card onto its cardboard placard does serve to hide the defacement of the card's PIN-protection coating. If someone were to subsequently buy that card without first fully examining it (that is, removing it from its packaging to look at both sides of it), he would leave the store with a breachable card in his possession. Likewise, so would a consumer who looked at both sides of a card he was considering buying but failed to understand the significance of the card's PIN already being easily readable.
While the e-mailed alert suggests selecting cards only from areas rendered inaccessible to the public (that is, in situations where the check-out clerk has to hand them to you rather than removing them from the rack yourself), keep in mind that store clerks have themselves been known to steal, and don't count on the isolation of the cards as surefire and certain protection against this form of fraud. Whether you choose a card from a rack or have a clerk hand it to you, always examine both sides of what you're buying before paying for it, even when that means removing the item from its packaging to do so. If you see signs of tampering, or you see that the card's PIN has been exposed, don't purchase the card. Instead, hand it over to the store's management, pointing out what you saw.
If the card itself is of the sort that can't be used in "card not present" situations, you need not worry about it nearly as much, because for a thief to drain it he would have to have the card itself, not just its number.
Here are some other ways criminals have been known to enrich themselves with gift cards:
- Employees at stores where gift cards are being vended steal them off the rack, activate them with the stores' scanners, then go on their own shopping sprees, sometimes using plastic stolen in this fashion to purchase other cards, thereby laundering their ill-gotten goods.
- Thieves pretending to be customers engage in a bit of sleight of hand by swapping blanks (stolen on previous trips) for cards activated by clerks during the sale, then regretfully change their minds and cancel their purchases. Those manning the cash registers are none the wiser because it looks like they got back the same cards, but the fully charged cards ride out of the stores in the thieves' pockets. In December 2002, two Tennessee men pleaded guilty to federal fraud charges after they were caught running this scam in an operation that stretched across six states and cost
Wal-Martmore than $35,000.
- Cards filched directly from store racks find their way to online auction sites, where the unsuspecting will bid on them, thinking they're getting a deal. The National Retail Federation advises consumers to purchase gift cards online only through reputable retailers and never through online auction sites, which may be dealing in stolen or counterfeit cards.
- Crooks will unobtrusively slit open bar code-bearing gift card packaging to remove new unsold cards and replace them with old
used-upones. When these nil-value cards are sold, the activation of the packaging's bar codes loads the real cards (which are in the thieves' possession) with the values they've been bought for. The hapless purchasers, the ones who forked over money for the cards, leave in possession of worthless bits of plastic.
As for the potential for thievery that gift cards offer the unscrupulous, consider how popular these easily transportable bits of plastic have become. The National Retail Federation's annual Gift Card Survey projects gift card sales will total
The popularity of gift cards have caused them to become such a large a part of festive season giving that there is even the potential for their markedly lowering the total dollar figure reported by stores for the 2006 holiday shopping season, making it temporarily appear retailers have been badly let down by the consumers they counted on to swell their sales figures and carry the year well into the black. Why? Because gift cards, unlike other baubles shoppers will pick up for their loved ones, are counted towards store sales only when they are used, not when they are bought. This creates what is known as the "gift card effect": the value of gift cards sold in November and December but not used until January works to fatten January's reported numbers rather than those of the closing months of the year.
Barbara "claus and effect" Mikkelson
How to Avoid Gift Card Scams:
- Purchase gift cards only from reputable sources, preferably directly from the store.
- Don't solely rely on a clerk's selecting cards for you from publicly-inaccessible stock as your one and only protection against being defrauded. Also examine both sides of cards yourself, keeping an eye out for signs of tampering and/or the exposure of the cards' PINs. Refuse to purchase cards where either is evident.
- If acquiring cards on the Internet, buy them from the online versions of the stores they are to be used in. Never buy them from auction sites, even if it looks like you could score a real bargain by doing so. Remind yourself that cards sold through auction sites have often turned out to be stolen or counterfeit.
- Keep your receipt as proof of purchase for as long as you have value stored on the card. Should you ever lose that gift card, use that receipt to ask the retailer to issue you a replacement. (Not all retailers will do this. But at least some do, so ask.)
- Immediately after buying a gift card in a store, ask the cashier to scan the card itself to ensure the plastic you bought is valid and bears the proper value. (This will protect you against the card's having been swapped out of its packaging for a zero-balance one.)
- Bear in mind that reputable companies will not ask gift card buyers to provide their Social Security numbers, bank account information, or dates of birth. If when trying to purchase such cards you're asked for this, walk away from the deal.
- If the card's issuer offers this option, register your gift card at that store's web site. Doing so gives you the ability to periodically check your card's balance online and so catch on to any misuse of the card far earlier than you otherwise would.
Last updated: 20 November 2006