Gift cards are popular around the world and scammers are cashing in on this popularity in a big way. In the US, consumers had lost $74 million to gift and reload card scams in 2019. This is one of our biggest motivations for starting Redeeem, we believe that using blockchain technology and smart software we can significantly reduce gift card scam like never before. In this article, you will learn how scammers do it and how to avoid gift card scams.

Why are Gift Cards a Target?

Gift cards are an easy target for scammers because they are untraceable. The fact that there is no personal information revealing the buyer or the recipient of a gift card helps scammers remain anonymous. Also, a consumer cannot reverse a transaction. Therefore, once the balance in a card is stolen, it is gone forever. Or until a merchant decides to give you store credit.

Furthermore, a gift card scam can take place so fast that you might not notice that something is wrong until it is too late to take action. Fraudsters use various methods to execute gift card scams. Below are five ways.

1. Stealing gift card numbers

In this method, scammers steal the identifying information of a gift card and when it is activated, they sell or use the card. To do this, the scam artist will pocket a gift card from an open rack in a store and when he is sure no one is looking, he will use a razor to take the card out of its package. He then scratches off the sticker at the back of the card and takes a photo of the card number and PIN. Next, he uses a similar sticker to hide the PIN, returns the card in its package, puts it back on the rack and leaves.

The fraudster will constantly visit the issuer’s website to check the card’s balance or they could use software to carry out this task automatically. In other cases, the fraudster will call a number that was also at the back of the card to find out if the card is activated. Once he confirms that the card is active, he will quickly redeem it or sell it.

For cards with a hidden card number, con artists use a magnetic stripe reader to reveal the digits.

Image from consumer.ftc.gov

2. Gift cards as payment

Scammers will call unsuspecting people and disguise themselves as IRS agents. They will then ask for gift card payments for incorrect tax refunds. It's extremely frustrating to receive these calls, and unfortunately there is not much you can do too get the bad guys in trouble. However, there is a fantastic mobile app that can detect and automatically block these calls called Robokiller.

3. Phishing attacks

Fraudsters will send you a phishing email offering you free cards to obtain your financial information. If you use Gmail, most of these phishing messages will be blocked, since other users report these as spam.

You can usually detect these phishing emails if you look closely at the clues.

  • It's from a brand you may know and trust, Netflix. It even uses a Netflix logo.
  • The email has a basic greeting, “Hi Dear.” If you have an account with the business, it probably wouldn’t use a generic greeting like this.
  • The email invites you to click on a link to update your payment details.
  • The email says your account is on hold because of a billing problem.
Here’s a real world example of a phishing email.

4. Balance confirmation

If you are selling a gift card on a site like Craigslist, a scammer will contact you to buy the card. But before buying it, they will request to confirm the card’s balance in a three-way call with the card issuer. The scammer then records the touch tones the card issuer enters during the call. After the call, the scammer will not buy the card but will use the recording to figure out the card number. Once he has the digits, he can use the card without the suspicion of the owner.

5. Generic Fraud Examples

Con artists hack issuers’ websites using bots in search of active card numbers with balances. For instance, fraudsters used GiftGhostBot in 2017 to hack 1,000 websites in search of active card numbers.

Other fraud methods include:

  • A cashier will keep an activated card and sell you an empty card.
  • Scammers will sell you empty gift cards online.
  • Someone might call you with news that you have won a prize in a game you probably never participated in. Next, they will say that you need to pay prize fees with a gift card.
  • A con artist will buy a card, rapidly drain its value and then cancel the payment.

Safety Tips

Now that you know how scammers do it, how can you avoid gift card scams? Below is a list of important tips on how to stay safe.

  • Buy your gift cards directly from issuers and people you trust.
  • When you get a gift card, register it immediately and change the PIN. You should then use it as soon as possible because the longer it stays unused, the higher the probability of a hacker stealing the balance.
  • Only purchase gift cards from resellers with guarantee policies.
  • Use Redeeem to only trade with top high quality sellers.
  • If your card balance is lower than it is supposed to be, reach out to the card issuer immediately.
  • Confirm that the number on your activation receipt matches the card number.
  • When buying a gift card, pay attention as the cashier scans and activates it.
  • Constantly check the balance on your gift card.
  • Do not lose your gift card’s receipt until you have used it completely.
  • Inspect gift cards for signs of tampering before buying them.
  • Do not divulge sensitive information like PIN or card numbers to anyone.

You can avoid gift card scams by using the above tips and applying caution. Additionally, if you are not using a gift card, exchange it for cryptocurrencies on Redeeem today. Also if you have a gift card and want to trade it for bitcoin, using Redeeem will be your safest option.