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Gift Card Fraud: When The Thought Doesn’t Count

gift card fraud, gift card activation, activate gift cards illegally, sell gift cards, half price gift cards, retail loss preventionGift card fraud is a popular entry-level crime because of the low chance of prosecution and the ease of theft. Anyone with a cell phone can snap a quick photo of the back of a gift card. Cashier error is often blamed and the store would rather eat the loss rather than alienate a customer.

With a busy holiday season approaching, your store will see more gift card activation as well as purchases made with gift cards. Now is the time to address the top ways thieves activate gift cards illegally and how to protect your store.

Gift Card Fraud is on the Rise

The popularity of gift cards makes them an easy target for theft. Consider just a few statistics around gift card purchases and gift giving.

  • Gift cards are the top requested gift for the holiday season (1)
  • The most popular gift card categories are: restaurants, grocery stores, pre-paid credit cards, coffee shops, and entertainment (2)
  • Gift card purchases are estimated to hit $160 billion by this year (2018) (3)
  • Approximately 93% of people will receive a gift card as a gift (4)
  • Almost all gift cards (90%) are redeemed within 60 days (5)

Cloning Gift Cards

One of the top ways to activate a gift card illegally is also one of the easiest. Thieves will steal a stack of gift cards, write down or photograph the numbers, and then return the gift cards to their display. Now they only need to wait for the gift card activation in order to steal the cash.

scratch off labels, gift card fraud, activate gift cards illegally

If a card has a PIN number, they can either scratch off the number and leave it bare. Or they can recover the PIN number with easily purchased security tape.

Most gift cards have a toll free number in order to check balances on gift cards. An amateur will just call and check balances, waiting for the card to be activated. More sophisticated thieves have phone robots which automatically call and check balances.

Switching Out at the Register

Another popular way to activate gift cards illegally is often achieved by your cashiers. In this scam, cashiers switch out partially used or newly activated cards with zero balance cards which they hand to the customer.

Maybe they only have $5 left on a coffee card or they just activated a $100 gift card. Either way, the cashier hands over a duplicate card with a zero balance and pockets the loaded gift card.

Best practices for gift card fraud suggest you investigate any customer complaints about zero balance gift cards by checking POS records and video surveillance. Review the data and see if same cashier is implicated in the gift card fraud.

Cracking Down on Gift Card Fraud

In today’s world of online reviews, it only takes one irate customer to tarnish your store’s reputation. Gift card fraud can cost your business both money and goodwill. There are several steps you can take to minimize gift card fraud in your store.

Keep gift cards secure

Rather than keeping gift cards openly accessible on the store floor, display gift cards behind the counter or under video surveillance. Keep the area clean and organized.

Look for signs of tampering

With all your gift cards in one area, you should be able to review the packaging carefully. Look for scratched off or replaced security tape over PIN numbers. Check for opened packages or bent cardstock packaging.

Create a stringent gift card policy

Train your employees to follow a detailed gift card policy.

  • Only apply gift cards which are present. (Do not accept numbers written down or memorized or photographed copies.)
  • Require receipts and ID for the return of gift cards.
  • If a customer brings back a gift card with a zero balance, double check the cashier who rang the sale. Look for patterns of employee abuse.

Monitor gift card resale sites

If your store issues company branded gift cards, monitor resale sites which sell gift cards and boast of half price gift cards. If it sounds too good to be true, if often is.

Ring gift card purchases last

If the sale is rung at the beginning of the transaction, an accomplice might be using the activated gift card right away. The customer then claims they no longer want the gift card and it is removed from the purchase. But the balance is already at zero.

A thorough retail loss prevention program addresses gift card fraud and the many ways to combat illegally activated gift cards at the cashier and employee level.

Author information

Jim Close is the Director of Loss Prevention at DIGIOP, bringing over 25 years of experience in all facets of Loss Prevention. His work with retailers spans from gift card fraud to internal theft.

Upcoming Gift Card Fraud Webinar

Join DIGIOP on a free 30 minute webinar on Tuesday, October 30th at 11 am EST, Learn how to prevent gift card fraud and protect yourself this holiday season.


 2018 Digiop.   •   Intelligence Inspired  
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