Holiday fraud cash

‘Tis the Season for Gift Card Scams

It’s hard to believe that the holiday season is almost upon us again. The year 2020 has been a wild ride, as we’ve collectively dealt with new threats and ongoing disruptions. It would be nice to believe that by December things will all be back to normal … but that probably won’t be the case.

Even under normal circumstances, the holidays are a prime period for fraud. And, if anything, this season is showing signs of being worse. With shoppers unable (or unwilling) to make their annual pilgrimage to the mall, we expect to see more online shopping than ever before.

Those opportunistic fraudsters are already circling like sharks, waiting for easy targets. Thus, we can expect a rise in two overlapping fraud sources: eCommerce and gift cards.

Gift card fraud may end up being the worse of the two. One report showed a global gift cards market valued at $ 619.25 billion in 2019, with the projected value to reach $1,922.87 billion by 2027. Whenever you see numbers like that, you can bet that fraudsters are already at work on schemes to capture a chunk of that money.

Why Thieves Like Gift Cards

In many ways, gift cards are ideal for fraud, because they’re anonymous: they can’t be traced back to a specific user. Since they function much like cash, criminals can use gift cards to access funds, make purchases, and more—and still keep their identity a secret.

There are multiple ways to commit fraud through gift cards, and some of them quite sophisticated. For example, thieves may employ an automated algorithm to roll through a list of potential account numbers and request the balance. If the result of any query returns a positive balance, the fraudster knows that a) the account number is legitimate (which may aid in finding future accounts); and b) and the account contains funds.

With just those two pieces of data, cyber criminals can use the account number to purchase goods, knowing that the crime will likely not be discovered for weeks or months. Indeed, it may never be discovered at all: CBS News reported that as many as 3% of gift card dollars are never redeemed. That amounted to roughly $3 billion in 2019 alone. 

Popular Scams

Here are a few other tricks fraudsters might use:

Pre-stolen card numbers: Typically, gift card displays aren’t heavily guarded, because the cards themselves are useless until activated. That makes it easy for a thief to sneak a few out the door, copy down the number, then rehang them in the store. After that, it becomes a matter of checking the online balance for those card numbers. Once someone activates one and the balance shows the amount, the fraudster can quickly drain the account through online purchases.

Phony balance checks: Aunt Clara probably meant well when she gave you that $100 gift card from Bass Pro Shops, but it’s been sitting in a drawer since last Christmas. Why not sell it online? Thieves watch for  gift cards that go up for sale, then contact the seller, allegedly to buy the card. They’ll insist on a three-way call to verify the balance with the retailer. The third party, of course, is the fraudster’s partner, who simply copies down the gift card information you freely offer.

Replacing the UPC: Like the “pre-stolen card numbers” scheme, this scam involves the theft—and subsequent return—of several blank cards. In this case, however, the fraudster actually buys one card, as well … then and copies the UPC barcode of that card onto stickers. The stickers are placed over the real UPCs of the stolen cards, which then go back to the store. Whenever any of those cards are activated, only the fraudulent code is scanned, and the balance goes straight into the fraudster’s “legitimate” account.

Protecting Yourself This Holiday Season

Whether you’re the giver or the recipient, gift cards are a popular and convenient gift. They’re also an easy avenue for scammers to steal from you. Gift cards are more like cash than a credit or debit card: if a fraudster hijacks your gift card and uses it, you probably won’t be able to get your money back.

With that in mind, here are a few quick tips for protecting your gift card investment:

  • Buy gift cards directly from the merchant. Avoid purchasing from online auction or marketplace sites, as those cards often turn out to be stolen, counterfeit, or simply non-existent.
  • Check the balance before and after you buy. If there is a balance prior to purchase, don’t complete the transaction. If there isn’t a balance post-purchase, it’s probably the work of a fraudster.
  • Inspect cards prior to purchasing. Check that none of the protective stickers have been removed, and that there are no stickers where there shouldn’t be—like covering the UPC. Be sure the codes on the back of the card haven’t been scratched off, revealing the PIN code.
  • Redeem gift cards quickly. The longer you hold onto a balance, the more time you give a fraudster to steal it. Plus, it’s easy to lose or forget about gift cards; using them as quickly as possible will help ensure you get the full value. Finally, some cards have expiration dates, so be sure to read the fine print.
  • Hold on to the receipts. Whenever you buy a gift card, save the purchase and activation receipt until the gift card is redeemed.

If you’re planning on giving or receiving gift cards this season, a little extra precaution can help keep your holidays jolly.