One of the risks associated with gift cards is fraud. Unlike a credit card, a gift card can be redeemed without identification and the gift card holder is liable for the loss of a fraudulent transaction. While there are several ways a criminal can defraud consumers with gift cards, it's a much less common crime when compared to that of credit cards. Nonetheless, merchants can take steps to help protect their gift card customers. Today we're covering one of more elaborate schemes criminals perform and one simple way it can be prevented.
Gift Card Cloning
In 2009, an Oregon man, Sealtiel Chacon Zepeda, was arrested for stealing thousands of dollars from unsuspecting gift card holders. While his scheme was elaborate, Mr. Zepeda was far from a computer genius.
In short, Zepeda would steal unactivated gift cards from store shelves, take them home and duplicate each card with computer hardware and software purchased online. After collecting the gift card information, he would then place the original gift card back on the store shelves and wait for it to be purchased and activated by an unsuspecting consumers. Zepeda utilized a computer script which would automatically check the balance of each stolen gift card several times a day via the internet. As soon as the a gift card was activated (funds added to the card), Zepeda would be notified and use his version of the gift card to purchase merchandise. After the card was redeemed, the true gift card holder would be left with nothing.
Scratch-off Security Can Help
One feature currently available for gift cards is a scratch-off security code or pin. Assuming the code is not accessible via the the magnetic strip and the merchant requires the code for both balance inquiry and checkout, Mr. Zepeda's efforts would have been fruitless.
When reviewing gift cards, we see plenty which do not have a scratch-off security code. For the most part, it seems to be for gift cards which are only redeemable in-store and not online. However, as demonstrated by the case above, scratch-off security pins should be implemented regardless of where a gift card is redeemable or purchased.
Gift Card Score® And Scratch-off Security
ScripSmart's patent pending scoring algorithm, Gift Card Score, penalizes any gift card program which does not include a scratch off security code. Simply put, Gift Card Score is designed to help consumers easily find the best gift cards and because consumers are liable for the loss of fraudulent transactions, we believe the best gift cards have well thought out protection for gift card holders.
Note: eGift Cards are not penalized for a lack of scratch-off security.
Have They Learned?
Several companies were exposed for not having proper security measures in place; we wanted to see where they currently stand with scratch-off security protection and whether or not it's required when checking a gift card balance online. The police report named the following merchants:
Fred Meyer Gift Card
Currently has scratch-off security, code required for online balance inquiry
Currently has scratch-off security, code required for online balance inquiry
Abercrombie & Fitch Gift Card
Currently has scratch-off security, code not required for online balance inquiry, but CAPTCHA enabled
American Eagle Gift Card
Currently has scratch-off security, code not required for online balance inquiry, but CAPTCHA enabled
Currently has scratch-off security, code required for online balance inquiry
Macy's Gift Card
Currently has scratch-off security, code not required for online balance inquiry, but CAPTCHA enabled
Spencer Gifts
Currently has scratch-off security, no online balance inquiry
The good news is a criminal would have a hard time automatically checking the balance for any of these gift cards. While both American Eagle and Abercrombie do not require the scratch-off code, they do have implemented CAPTCHA when checking the balance which ensures only a human and not automated script is requesting the balance of a gift card.
