As we head into the final stretch of the busiest shopping season of the year, we ought to be careful of scammers and their ever-evolving ways of swindling unsuspecting victims. One of such ways is through Gift Cards. Scammers take advantage of the holiday season to target you — whether you’re shopping for gifts online, booking holiday travel, looking for seasonal work, or trying to donate to charities. In some cases, the cards themselves are used as bait to manipulate you into giving your sensitive information while in other cases the fraudsters will impersonate officials, demanding payment via gift cards. 

What is a Gift Card ?

A gift card is a prepaid debit card that contains a specific amount of money available for use for a variety of purchases. A gift card can either be open loop, closed loop while some gift cards may allow for cash withdrawals at an automated teller machine (ATM). 

Types of gift cards ?

Closed-Loop Gift Cards: Closed-loop cards can only be used at the specified retailer store or sites. It allows cardholders to purchase anything from the merchant either at the store or on its website. However, if one company owns several different retailers, it might issue gift cards that can be used at any of them. Closed-loop gift cards usually are not reloadable, so once the balance is spent, they have no further use. These cards usually will not require any activation fees and funds on a closed-loop gift card may have a specified expiration date, which requires the user to use the card within a set time frame. These cards usually include the merchant’s logo; in a sense, they act as advertising for the store. 

Open-loop Gift Cards: Gift cards will display the payment processor’s logo and can be used to make all types of electronic payments mostly anywhere. Open-loop gift cards have the advantage of serving as a standard prepaid card; these cards are usually reloadable, allowing the user to add funds on their own as well. Open-loop cards will sometimes require an activation fee which must be paid when the card is purchased. 

How does a gift card scam happen?

Usually these scams occur when the scammers ask consumers to purchase gift cards as a form of payment. The consumer then provides the gift card number to the scammer based on the assumption that they’re making a legitimate payment. Here are top tricks to watch out for:

  1. Cybercriminals create fake sites for sales of items at too-good-to-be-true prices. Once you send the scammer money, it’s all gone. They also lure individuals into paying a fee using gift cards in order to claim a giveaway prize or competition you never won. 
  2. Gift cards should be purchased from known sources to avoid compromising your card details. It is possible that the webpage you’re inputting your card details (16 digits on your card, pin or CVV) has been cloned.
  3. Travel scam scheme –  many people are looking for cheap airline tickets for the season so scammers target travelers with schemes ranging from bogus flight-booking websites to fraudulent flight cancellation emails and sudden price increases using gift cards as payment method.
  4. Scammers may send phishing messages impersonating companies like Amazon or Apple and offer special discounted gift cards or claim that your account has been hacked  and require a fee to unlock.
  5. Some fraudulent card schemes center on payment of activation fee of the gift cards. Some scammers charge massive fees just to activate your card and end up a scam.

How to stay safe from gift card scams?

  1. Carry out due diligence on vendor sites: if it’s too good to be true then it probably is. Some topline signs of low-trust sites are poor spelling, bad quality images, fake-sounding reviews and mouth-watering discounts (50% off or more) on all of their items. 
  2. Only purchase gift cards from reputable retailers: If you’re buying online, crosscheck the store’s URL to know if it’s secure. Always buy gift cards from the actual retailer or company.
  3. Purchase airline tickets directly from a reputable airline If you receive any messages about your trip, contact the airline directly to make sure the message is legitimate.
  4. Never be quick to share your personal information such as account number or card details 
  5. Be cautious and trust your guts. Once it looks strange, it may actually be strange. You could tell someone to confirm and recheck your suspicions. 

These scam tricks are endless and that’s why we aid you to get familiar with these tactics. We’re so glad to have you as a client and look forward to serving you in the future. Stay safe and Happy Holidays.

Contribution by Members of the Fraud Team.

Published by Temitope Bamidele

Risk and Anti-Fraud