Cheryl Parson: Gift card fraud


By Cheryl Parson - Better Business Bureau



Gift cards. They are everywhere!

According to a 2013 Smithsonian Magazine, it was Neumann Marcus stores that first introduced the gift card; however, the article also says the company didn’t advertise or display them. The article goes on to explain it was Blockbuster that first displayed gift cards in its stores to counteract the widespread counterfeiting of their paper gift certificates. Starbucks soon followed suit, introducing gift cards that could be reloaded.

An AARP survey found that two-thirds of the public intended to buy them for the 2020 holiday season. In a 2019 survey by Blackhawk Network people were asked who they purchased a gift card for. The list broke down into these categories: close family member (73%), friend (49%), extended family member (37%), a child other than their own (19%), colleague, employee, or boss (18%).

Did you notice none of the categories listed above was “purchases for scammers”? In a BBB study released just this past March, gift cards are a fast-growing means of payment for scams such as government impersonators, tech support scams, romance scams, fake checks scams, prize/sweepstakes scams, and business email frauds.

According to the Federal Trade Commission (FTC), about one in four people who report being scammed said they paid with a gift card. Losses reported by victims totaled more than $245 million, with a median individual loss of $840.

Why are gift cards so popular with scammers? For scams to be successful, crooks need a way to get money from their victims. Scammers use a variety of excuses and reasons to convince their victims to buy a gift card as a payment method. One common example is the threat of immediate arrest if the victim fails to comply.

Most often scammers ask for the numbers on the back of the cards which allows scammers to quickly steal all the money loaded on the cards. If victims question why gift cards are being used for payment, scammers use a plausible excuse, such as the government recently entered into a contract with a gift card company to handle transactions.

The FTC says, “Anyone that demands payment by gift card is always a scammer.”

Typically, scammers tell victims to drive to a retailer to buy gift cards. They tell victims what kind of cards to buy, frequently staying on the phone with the victims during the process. The most reported gift card brands are eBay, Google play, Target, iTunes, and Amazon.

How do scammers actually get the money from gift cards? There are a variety of methods to convert cards into cash:

• They go to stores or websites and buy things such as phones, electronics, or other goods they can resell at an online site such as Craigslist or eBay.

• Some cards, such as Green Dot, can simply be used at an ATM to withdraw cash.

• The numbers from cards can be resold on sites like craigslist, eBay, or other online marketplaces.

Cards are often exchanged for cryptocurrency with reports some scammer gangs traded the cards for Bitcoin at a rate of $21 million per week in 2018.

How can consumers avoid becoming a victim of gift card payment scams?

• Remember, no government agency ever requests money via gift cards.

• Never give the numbers on the back of a gift card to anyone you do not know. Providing those numbers is like sending cash and the money is rarely recoverable.

• Remember what the FTC says, “Anyone that demands payment by gift card is always a scammer.”

To access the entire BBB report on gift card fraud, go online to bbb.org/giftcardfraud. There’s a lot of really good information to help inform and protect you.

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By Cheryl Parson

Better Business Bureau

Cheryl Parson is president of the Better Business bureau serving West Central Ohio. The BBB may be found on the Internet at www.lima.bbb.org.

Cheryl Parson is president of the Better Business bureau serving West Central Ohio. The BBB may be found on the Internet at www.lima.bbb.org.

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