How to Prevent Gift Card Fraud in This New Year


In 2018, the U.S. gift card industry’s worth reached $160 billion and it is projected to continue to increase in the coming years. Not only are gift cards profitable for retailers due to customers often spend more than the cards’ initial values, gift cards give customers the freedom to choose their gifts. Meanwhile, gift cards have become a big target for fraudsters and scammers to steal balances and launder money. Due to its easy access and low chance of prosecution due to low dollar amounts, gift cards frauds have skyrocketed in the past couple of years. Based on Federal Trade Commission (FTC), the use of gift cards as a payment vehicle in scams had more than tripled since 2015, from 7% to more than 26% now. According to the FTC, it is a sign of scam when someone asks to pay by gift card, or by wiring money for any reasons. If you are pressured to payment quickly, odds are it’s a scam.

Below are some anti-fraud advices for retailers and customers to look out for to prevent from falling victim to gift card fraud.

Anti-Fraud Tips for Retailers:

  • Security Captcha Check on Website. Prevent bots from hackers to crawl your website by using security tools and captcha check to force a bot to prove it is human.
  • Gift Card Identification & Personalization. Cross-reference customers’ personal information, nurture returning customers, offers promos and discounts on gift cards, and make personalization options available so it becomes easy for customers to spot if their cards have been switched.
  • Scratch-off coating. Hide the card’s barcode by covering it with a scratch-off coating. To avoid gift card cloning, require a scratch-off PIN for balance checks via the Internet. You can also flag repeated or multiple balance checks as potential fraudulent activity. To avoid laundering, require a scratch-off PIN to activate gift cards instead of activating gift cards at the point of sale.
  • Employee Training. Train your employees to spot altered cards.

Anti-Fraud Tips for Customers:

  • Buy gift cards from reputable, trustable sources. Avoid buying gift cards from online auction sites, because the cards may be counterfeit or stolen. Buy online especially if you’re purchasing a high-value gift card.
  • Inspect a gift card for signs of tampering before you buy it. Preferably look for gift cards kept behind the counter or in well-sealed packaging. Check that none of the protective stickers have been removed. Make sure that the codes on the back of the card haven’t been scratched off to show the PIN number. Report any damaged cards to the store selling the cards.
  • Keep the receipt with the gift card. Whether you’re giving or getting, try to keep the original purchase receipt, or the card’s ID number, with the gift card.
  • Read the terms and conditions of the gift card. Check for expiration date, fees for usage, shipping and handling, whether fees be taken out every time the card is used, or after it sits unused for some period of time.
  • Keep an eye during checkout. To prevent from potential card switch at checkout, keep your eye on the gift card at all times and ask to have it handed back to you as soon as the card is activated. Check the gift card number listed on the activation receipt to ensure it matches the number on the card you just received as well.
  • Use the card as soon as you can. Gift cards are often easily misplaced or get forgotten. Using them early will help you get the full value.
  • Treat gift cards like cash. If your card is lost or stolen, report it to the card’s issuer immediately. You might not get back the money left on the card – or you might get some, perhaps for a fee. You might need to show the receipt and the ID number on the card. Most issuers have toll-free telephone numbers you can call to report a lost or stolen card – find it on the card or online.
  • Secure your home computer. Criminals also gain access to your gift card numbers and PINs by hacking your computer, based on Consumer Reports. To prevent the hack, make sure your security software is the most up-to-date version and create strong passwords to protect your privacy.
  • Limit sharing personal information. Never provide your gift card number and pin to anyone you don’t know.
  • Be aware of suspicious emails. Don’t open email attachments or click on suspicious links that are not from legitimate sources. Search business records and reviews online to check the sources.

To make matters worse, according to Vantiv, 62% of gift card fraud is actually committed by employees. In order to prevent theft when selling gift cards, it is crucial to implement comprehensive standards and practices for your employees. As gift cards become important revenue to retain customers for your business, it is imperative to pay attention and secure the cards so your business and customers don’t become victims of gift card fraud. Check with your POS provider and payment processing company to make sure you have a good gift card program for your business that is reliable in fighting fraud while increasing customer loyalty for your business.


CIO, ConsumerReportsFTCGiftcards, IDSuperstore, NationalMerchants, Silive, Tripwire1, Tripwire2