Be Aware of Gift Card Fraud
Owing to their versatility, gift cards are one of the most popular gifts given during the holidays. In fact, consumers spend over $25 billion on gift cards during the holiday shopping season alone.
Though gift cards issued either by a specific merchant or by a credit card network can make great presents, consumers should be aware of the potential for gift card fraud.
What Is Gift Card Fraud?
Gift card fraud occurs when merchants fail to follow federal rules regulating gift card issuance and usage. Examples of fraud include:
- Excessively quick expiration dates. All gift cards issued after August 22, 2010 must be honored for at least five years after the point of sale.
- Hidden fees. All terms and fees associated with the card must be disclosed to the consumer at the time of sale.
- Changing the conditions and terms associated with the card. Once a card is purchased, its terms and conditions cannot be changed.
- Declining a card for invalid reasons. Merchants may refuse to apply the value of the gift card to a purchase that has a higher price than what the card is worth. For example, if you want to buy a pair of $100 shoes but your gift card only holds $25, the merchant must honor the $25, meaning that you still owe $75 plus tax.
- Fees being deducted from gift cards. Some fees are allowable at the point of sale for gift cards. However, the fees cannot be deducted from the card. For example, if you purchase a $20 card, the balance must be $20 (not $18.50 after fees are deducted).
Steps to Protect Yourself from Gift Card Fraud
When purchasing a gift card or certificate, whether it is for you or someone else, adhere to the following guidelines to protect yourself from gift card fraud.
- Understand use restrictions before purchasing a gift card. Some cards are only valid in-store, others can only be honored online. Pay particular attention to refund policies in case you need to make an online shopping return later. Purchases made with gift cards are usually only honored with store credit.
- Clarify whether or not there are fees attached to the gift card. Merchants should offer a disclaimer if there are fees at the time of purchase, though consumers may have to ask if there are other fees associated with the card. Charging these types of hidden fees is one of the common scams against senior citizens and other less vigilant members of society.
- Have the expiration date clearly defined for you. As mentioned above, there is a legal minimum expiration date of five years for all gift cards issued today. Even if there is no expiration date or the date is a long way away, try to use the card promptly or encourage the recipient to do so to avoid problems in the future.
- Ask for a copy of the receipt. Keep one for yourself and one for the gift recipient. This receipt is essential if the card is stolen or lost or if the merchant disputes the value that is on the card.
- Know the replacement policy for cards that are stolen or lost. Gift cards are as good as money with certain retailers, so recouping your losses in the event that a card is lost or stolen is of utmost importance.
- Buy cards only with reputable businesses. You wouldn’t want to buy a gift card for a business only to have it file for bankruptcy a few weeks later. Most merchants have a policy for honoring gift cards in the event that they go out of business, but it is best to support reputable businesses where this will not be a concern.
- Inspect cards carefully before making a purchase. Do not buy gift cards from online auctions. The information that auction sites collect, sometimes without you knowing it, can cause problems later. Avoid email scams and gift card fraud by purchasing cards in person and inspecting the card to ensure that all of its safety features, such as its magnetic stripe and hidden PIN numbers, are intact.
If you do become the victim of a gift card scam, let eConsumer Services® know right away. We will help you get your money back from the unscrupulous merchant. Fill out the form to the right and we’ll get started right away.
Gift cards are popular gifts for a reason: because they allow the recipient freedom of choice, thereby easing pressure on the giver. Most gift card transactions have no problems, but using a bit of caution to avoid gift card fraud can save a lot of frustration in the long run.