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Legal, Regulatory, and Privacy Issues

Gift card scams: What to look out for, and how to protect yourself

Fraudsters have discovered a variety of ways to relieve you of your money using gift cards

Summary

In recent years, fraudsters have developed a variety of ways to scam you out of your money using gift cards as the weapon. Here are common gift-card-related methods crooks use today, and how you can protect yourself.

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Gift cards have long been a staple for those of us who don’t know what to buy for a friend or loved one’s special occasion.

But these cards can be the gift that keeps on giving to fraudsters. In recent years, they’ve developed a variety of ways to scam you out of your money using gift cards as the weapon.

For the first nine months of 2018, gift cards and reloadable cards like Green Dot were used as the payment method in 26 percent of the fraud cases reported to the Federal Trade Commission. That was a 270 percent increase over 2015.

Here are common gift-card-related methods fraudsters use today, and how you can protect yourself.

See related:  7 things you need to know about gift cards

On the phone

One of the most intimidating cons involves getting a call from someone claiming to work for the IRS. The person demands payment of taxes they say you owe, often citing a case number. The fraudster then says you must pay with a certain type of gift card, usually within a matter of hours.

To make it easier on you, the scammer suggests you stay on the phone, drive to the nearest store, buy the specific cards asked for and read the gift card numbers to the caller.

Before you can get back to your car, your money is gone and there’s nothing you can do. You have no recourse, warns Michael Lai, CEO and co-founder of Sitejabber.com, a consumer reviews platform where reviewers also report the scams they encounter.

“Scammers ask for Amazon, Best Buy, Home Depot, Google Play and other very common, very mainstream gift cards,” says Lai. “These are widely available and can be easily incorporated into the story the scammer is telling.”

In another scenario, an imposter calls and says your Social Security card was used in a crime. They may say it was found in a car at the border with blood on it, for example. The scammer then says to work this out you must transfer all the assets from your checking account to a gift card, and then he’ll set you up with a new bank account.

Now you have an empty checking account and you’ve been set up for identity theft, says Kathy Stokes, director of fraud prevention at AARP.

On the rack

Even if you ignore scam calls, you can still be a victim when buying gift cards in a store.

Although many retailers encase their gift cards inside thin cardboard that covers the pin number, cons have found a workaround.

Steven Weisman, a lawyer and professor at Bentley University who teaches about white collar crime, described a new scam that involves concealing the bar code on a gift card and replacing it with the bar code for a card the scammer has. When funds are added to the card by the retail cashier, the amount goes directly to the card of the fraudster.

A swindler can also scan gift cards’ bar codes, and then visit the website where retailers keep track of gift cards that have been activated. This is the same place where a legitimate gift card holder can see if his card has been activated and what the balance is. If the scammer has done his deed, the card will have no value when the rightful owner tries to use it.

See related:  Poll: Americans leave their personal info open to thieves

On the web

Imposters have also gotten involved in online gift card exchanges, where you can sell cards you won’t use and buy others at a discount.

Lai says one of the main complaints he hears is people buy these discounted “gift cards,” but get nothing in return. Or the buyer gets a previously-owned card with no value.

Lai suggests using reputable exchanges that offer you a guarantee, including Raise.com and Cardcash.com.

Ever lose track of the current balance on one of your gift cards? Fraudsters, who have set up websites purporting to give you the present balance, are counting on that.

“Unfortunately, these are scams and anyone entering the information off their card will find them quickly emptied of any value,” explains Weisman. “This issue is compounded because the scammers can manipulate the algorithms used by Google and other search engines to make their phony gift card site rank high on any search.”

To find your remaining balance, go to the issuing retailer’s site, says Weisman. You may be able to register your card there. That way you have an avenue to report any problems that occur.

Retailers’ efforts

Gift card issuers are aware of these illegal activities and are trying to put a stop to them.

Between training their employees to educate customers, watch for signs they are being victimized and limiting the number of gift cards and cash amounts sold to one person, retailers are doing what they can to decrease gift card fraud.

“Many train workers to spot red flags that someone is being victimized like when they stay on the phone while buying gift cards,” says Stokes. “But when a victim is at that heightened emotional state, it’s hard to tell them they are involved in a scam.”

CVS asks gift card buyers to read a warning before completing the sale, and it limits customers to $2,000 in gift cards in one day, a company spokesman said via e-mail. And Stokes says some retailers won’t let you use a gift card to buy another gift card.

Best Buy has teamed up with AARP and the National Association of Attorneys General to launch a campaign designed to raise public awareness of gift card fraud.

There are no statistics to prove whether or not the retailers’ efforts are successful. But Stokes says some positive stories have surfaced.

For instance, in 2017 two Target employees in Virginia helped foil a scam in which an elderly couple were nearly tricked into buying two gift cards at $2,000 a piece while under the impression their grandson was in jail.

See related:  How to protect your cards and accounts online

What you can do

Here are some take some steps you can protect yourself from fraudsters when buying gift cards:

  • Buy them from behind the customer service desk instead of pulling them from a store rack whenever possible
  • Check to see if the PIN has been scratched off or exposed in some way
  • Look for stickers that cover the bar code
  • If the card is preloaded, ask the cashier to scan it and prove it’s still fully valued

Stokes also cautions you to avoid online auction sites because that’s fertile ground for people selling fake or stolen gift cards.

If you’re approached by phone, ask a lot of questions to verify the caller is being truthful, Lai suggests. Call the business the caller says he represents. Look up that number for yourself – don’t get it from the caller. Then ask if someone there was trying to reach you.

“Offer to pay by PayPal or credit card instead of a gift card,” says Lai. “Both offer a certain level of fraud protection. And there’s no reason the government will ask for payment by gift card.”

Report anything that happens in the way of gift card fraud to the FTC, so they can add it to their fraud watchlist and help others avoid these scams.

In conclusion, Stokes says it’s always a scam if you’re asked to pay with a gift card.

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Published: September 16, 2019

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