Gift card scammers skirt security with new tricks
By Claire Bushey
|More from our 2013 gift card package
With security improving around gift cards, scammers are
resorting to new tactics, including old-fashioned trickery and new technology. "As
the locks have gotten more sophisticated, so have the lock picks," says Ben
Jackson, a senior analyst at Mercator Advisory Group, a Maynard, Mass.-based
company that tracks the consumer payments industry.
Gift cards attract criminals because they're big business. U.S.
consumers loaded $112.3 billion onto gift cards in 2012, according to Mercator
reports published in August. The figure includes both closed-loop gift cards,
which can only be used at a single retailer, and open-loop cards, which can be
used at any store that accepts them. The dollar amount loaded on closed-loop
cards grew 4 percent from 2011, while the open-loop market grew 7 percent.
"The thing about gift card fraud is it's the old, ‘John
Dillinger, why do you rob banks?' ‘Because that's where the money is,'" Jackson
Classic schemes evolve
Thieves continue to use some of the same scams they
pioneered several years ago, experts say, but often with a twist. In a classic gift card scam, a thief checks gift cards displayed
in a store and writes down identifying information or lifts it from the card's
magnetic stripe using a scanner. The crook then goes home and repeatedly checks
online to see when the card is activated (usually this is done when the cashier
rings up the purchase of the card). Once activated, the thief spends the card
In another traditional scheme, a thief will apply a bar-code
sticker over the genuine bar code of a gift card in a shop. When the sticker is
scanned, it activates a blank card that the crook has stolen instead of the
card the consumer is purchasing.
As the locks have gotten more sophisticated, so have the lock picks.
Mercator Advisory Group
Technology is allowing scammers to streamline part of the process,
says Jackson. Rather than having to hit "refresh" on their computers
until they see that a card has been loaded with value, thieves now use computer
software that automatically checks the value of a card multiple times in a
short span. Card processors have caught on, however, and now consider such
repeated value checks a red flag for fraud.
Card manufacturers are also beefing up security by upgrading
packaging to make it harder for thieves to record card identification numbers. But
fraudsters have, in turn, adapted by using "social engineering,"
otherwise known as the traditional tool of the con man: the gift of the gab. They're
approaching merchants directly to obtain the necessary card data.
Often this social engineering takes place at the point of sale,
Jackson says. Scammers telephone a store, reach a clerk and identify themselves
as representatives for the company's central office. They'll ask the clerk to
activate a card, load it with value, and then give the thieves the identifying
numbers so they can check that it was activated properly.
"They're essentially creating money out of thin air," Jackson
A similar, darker, scam involves callers using threats to
try to get information from retail employees. Stores in Savannah, Ga., received
warnings that the stores would be blown up if a store manager didn't load $500
onto 10 reloadable prepaid debit cards, then read the card numbers over the phone.
The FBI, which is investigating, says no manager complied and
the bombs never went off, but the scam has appeared in other parts of the
Gift cards are an anonymous account to put money on, and anything anonymous in the world of fraud is desirable.
Gift card marketing manager, Travel Tags
Oldie but goodie
One of the most popular crimes involving gift cards hasn't
changed much. Thieves are still buying gift cards with stolen credit cards, says
Martha Weaver, the gift card product marketing manager at Travel Tags, an Inver
Grove Heights, Minn.-based company that manufactures 500 million gift cards a
year. Buying a gift card allows a thief to extract money from the credit card
before the cardholder notices the credit card is missing and cancels it.
"Gift cards are an anonymous account to put money on, and
anything anonymous in the world of fraud is desirable," says Weaver. "It's seen
as a way to launder money."
Fraud detection has gotten better both at card processors
and among law enforcement agencies, says Dan DeFelippi, a former card thief who
has consulted with the Secret Service on fraud techniques and now works as a
web developer. Training has improved and there are now more links, formal and
informal, between law enforcement and card processors' internal fraud detection
"If they have inside contacts, it helps (law enforcement)
investigate, and they'll catch more people and prevent more losses from
happening," DeFelippi says.
You can protect yourself from gift card scams by following a
few common-sense steps.
See related: Layaway 2013: Survives recession's end, but evolves
gift cards like a food purchase. The same way you wouldn't eat a candy bar whose
packaging is torn or battered, stay away from gift cards if the packaging
appears damaged. Some card manufacturers are moving away from paper "clamshell"
packaging that can be sliced open and resealed in favor of tougher, plastic
packaging that can't be opened without destroying the package.
give out confidential information. There's no reason for a sales clerk to
ask for the number of a gift card, so if you encounter that situation,
challenge the request and refuse to provide the information. The same applies
for callers who request such data to "check the card's value."
online sellers. If you're buying a card at an online marketplace like eBay or
Gift Card Rescue, read what previous buyers say about any seller with whom you're
consider doing business. Stay away from sellers with negative reviews.
- Act fast. If your gift card balance is not what you
expect it to be, contact the card issuer immediately. Not only do you improve
your chances of retrieving your money, you help others, since scammers
generally perpetrate the same fraud on multiple victims.
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Published: November 26, 2013