Urban Legends Reference Pages: Gift Card Theft

 Grift Card

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]

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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...

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Origins:  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, given what
we've seen of gift cards. Certainly the warning being circulated in
e-mail (which was issued by the Jackson County [Oregon] Sheriff's
Department as a 9 November 2006 "Fraud Alert") does not apply to
all gift cards, but only to those that can be used in "card not
present" (aka "CNP") situations, such as when making purchases
online. And even among those, only the ones that don't offer
additional security measures in the form of encoded PINs (that
rightful cardholders have to acquaint themselves with in order to
use their cards online) are undefendable against this form of
theft.

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-
Mart more 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-
up ones. 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 $24.81 billion
for the 2006 holiday season, a $6 billion increase over 2005's
$18.48 billion. Furthermore, says the NRF, the average consumer
will spend more on gift cards than they did in 2005: $116.51 versus
$88.03.

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

The URL for this page is
http://www.snopes.com/fraud/sales/giftcard.asp

Sources:
Gardner, Marilyn.  "More People Give the Gift of Choice."
Christian Science Monitor.  13 November 2006  (p. 13).

Monroe Bell, Nichole.  "Protecting Against Fraud."
The Charlotte Observer.  22 October 2006.

Zimmerman, Ann.  "Creative Crooks: As Shoplifters Use High-Tech
Scams, Retail Losses Rise." The Wall Street Journal.  25 October
2006  (p. 1).

National Retail Federation.  "Holiday Gift Card Sales Reach
All-Time High, According to NRF." 17 November 2006