Gift Card Blog - ScripSmart

Why A Non-transferable Gift Card Makes No Sense

There are a few things which still puzzle me when it comes to gift cards. One of them is when companies state a gift card is "non-transferable" in the terms and conditions.

It's confusing because we all know that most people buy gift cards to give to another person. In other words: the very concept of a gift card is to transfer (or give) it to another person. By placing non-transferable in the terms, the issuer is essential forcing a consumer to break the terms when using the product as intended.

Sometimes, companies state a gift card is "non-transferable for money or barter" or something along those lines. At least this wording permits a gift cardholder to give away a gift card to another person; however, it still aims to prevent the gift cardholder from selling or trading their property.

My understanding is such clauses are included to protect the merchant from fraudulent activity. I've spoken with several gift card issuers in the past. Those who are not fans of the secondary market where you can buy discounted gift cards tend to believe the secondary market is a liquidating ground for gift cards obtained fraudulently.

For example, imagine a thief steals merchandise and then returns it to the store. It's possible the store may have a generous return policy which allows for returns without a receipt. However, instead of giving them cash, they will give the customer store credit in the form of a gift card. This helps curtail some of the fraudulent activity and lowers the incentive of thieves to keep stealing from the same store. However, if the thief can go to the secondary market to sell the gift card for cash, it makes the gift card nearly as good as a cash refund.

Obviously, I'm not a fan of anyone abusing the secondary market. In fact, I understand these merchant's perspective. I also believe a secondary market managed by companies with solid track records is a good things for consumers. Either way, a person should be able to do what they want with the gift card. There are thousands of discount gift cards available for purchase and I'm willing to bet the vast majority were legitimately obtained by the people who sell them for cash. If a consumer has no use for a gift card, they should be able to give it to another person, trade it or even sell it to a company who facilitates the buying and selling of discount gift cards.

The fact is, it's going to be difficult to enforce a non-transferable clause. As I mentioned before: the gift card issuer is unlikely to know who the gift cardholder is at any point in time. Not knowing who owns the gift card, makes it nearly impossible to determine if a gift card was transferred in violation the terms and conditions.

If a gift card is obtained fraudulently, the merchant should have every right to protect themselves and cancel the card. However, the rest of us should not suffer as a result of a few bad apples.

3 Reason To Frequently Check The Balance Of Your Gift Card

When reviewing and scoring gift cards for ScripSmart, we like to see multiple options for checking the balance of a gift cards. From  online, by phone to in-store, the more options the higher the Gift Card Score. The fact is, making it easy for a gift cardholder to obtain their balance is an important component of providing a consumer friendly gift card program.

Here are 3 why you should frequently check the balance of your gift card:

1. Motivation To Redeem

We recommend keeping the total value of gift cards you have unredeemed to a minimum. By knowing the balance of your gift cards, you just might find that extra push to get out there and use them. The difference between having a $10 gift card to Starbucks on your iPhone and $450 worth of gift cards from 5 different merchants sitting in the drawer is huge.

2. Avoid Post-sale Fees

If there are post-sale fees, they are often deducted monthly and in amounts less than $5 per month. If you're holding on to a gift card and see a fee was deducted, you'll catch it right away and have the opportunity to redeem before another deduction reduces your balance. Those with visa gift cards should especially take note of this point.

3. Avoid Gift Card Fraud

A good friend recently told me a story of the remaining balance of their gift card mysteriously disappearing. In short, they used a portion of the gift card's balance and when they went back to use the remaining portion it was gone. It turns out the server of the restaurant gave themselves a $20 tip! If there should be value remaining after you use a gift card, always check the balance to ensure it's accurate.

Do You Have A Lot Of Gift Cards?

If so, you need a little help getting the motivation to redeeming your gift cards. The good news is you're in luck: ScripSmart offers a free account system which allows you to register gift cards you own and, in turn, receive helpful alerts. One such alert is a monthly summary of the gift cards in your account. We also offer 'nag-me' alerts which bug you into redeeming those gift cards ASAP. Create your ScripSmart accoutn here.

Why Keeping Your Gift Card In A Mobile App Is A Smart Idea

A couple of weeks ago I wrote about Jonathan's Starbucks Gift Card. In short, it was a gift card people were sharing; strangers would both add and reduce value in a pay-it-forward social experiment. The experiment brought up several questions, most about human nature; however, for me, it raised the question: are mobile gift card apps safe for consumers?

The Future Of Gift Cards Is Mobile

There is no doubt the future of mobile payments is bright and gift cards will be a big part of the action. The Starbucks Gift Card App has been tremendously successful with consumers and for good reason: they are easy to use, automatically keep the balance and best of all you'll always have the gift card in your pocket. However, the Jonathan's Card Experiment demonstrated one important vulnerability of mobile gift card apps which create bar codes to be scanned at the checkout counter.

Easy To Duplicate, Hard To Identify

The Jonathan's Card experiment worked because people could use an image of the Starbucks Mobile App which included the bar code of the gift card and use it for payment. This image is displayed on the right and if displayed on an iPhone, it looks just like the real application. This makes it difficult for the checkout clerk to determine what they are scanning is a duplicate or the original.

Creating this is image is very easy, just take a screen shot of the iPhone with the original mobile app. It's possible a smart phone could end up in the wrong hands, the card duplicated and the owner might never know.

Less, Not More Risk

It begs the question: if you add your gift card to a mobile app  which produces a bar code image of the gift card, are you increasing the risk of losing the value of your gift card to fraudulent use?

In short, the answer is no. After all, a person must still access the application on your mobile phone, take the image and send out the image to others. I don't see this as any more of a possibility than having a wallet lost or stolen. Furthermore, the Starbucks Mobile App has the option of being locked with a password and most smart phones can also be locked with a password. I can't say the same for a wallet.

If you own a gift card and there is a mobile app for it, I think it's a smart decision to use it. Just be sure to dispose of or hold the original plastic gift card in a safe place.

The Mobile Apps Version Of Scratch Off Security

When scoring gift cards, our algorithm likes to see a scratch off security code on the back of plastic gift cards. Its' a great way to prevent fraud. Perhaps a Mobile Gift Card App version of such fraud prevention would be an animated portion where the gift card bar code is displayed on the mobile phone. This would allow the checkout clerk another tool in determining if the bar code being show is authentic.

What do you think? Do you use mobile gift card apps when available? Are they better than keeping it in your wallet?

Community Starbucks Gift Card Terminated: Jonathan's Card

There's been an interesting experiment going on with a special Starbucks Gift Card called "Jonathan's Card". In short, it's a gift card which strangers were both adding and reducing the value. Think of it as a shared gift card. Simply by showing an image of the gift card's barcode (generated from Starbucks iPhone app), anyone could access the card.

Paying It Forward

I love paying it forward concepts like this and see the gift card as a natural fit. While sharing the value of a gift card is against the terms of the Starbucks Gift Card, Starbucks was actually cheering on this experiment. (It's great advertising for the product.) Looking at the twitter feed for the Jonathan's Card, there was a lot of activity of increasing and decreasing the value.

Fraudulent Use - Gift Card Terminated

Unfortunately, Jonathan's Card has been canceled by Starbucks. People can no longer add value or use it to pay for coffee. Starbuck's decided to pull the plug because some people were abusing the gift card and exploiting the nature of the program. (Not great advertising for the product.)

Apparently, Jonathan is not the only person who has clever ways to use a Starbucks Gift Card. Another developer wrote a script to check the balance of the card and transfer funds from Jonathan's Card to his own personal Starbuck's Gift Card. Apparently he transferred $625 in just 5 hours. Naturally, a person could easily sell the card to a number of third parties who sell discounted Starbucks Gift Cards and receive cash.

While this experiment is officially over, gift cards are consistently being used in new and interesting ways. This experiment also raises some interesting questions about the security of mobile apps which generate barcodes for payment; expect a post in the near future covering some of the security aspects of mobile payment applications.

The 1.1 Million Dollar Gift Card Ponzi Scheme

You read the title correctly. A Columbia, South Carolina woman has plead guilty to a "gift card ponzi scheme" which defrauded her victims out of $1.1 million.

Annette Marie Benson was in the business of selling discounted gift cards. The gift cards were real and discounts ranged from 20-50% off the face value; demand for her product was high.

Apparently, Benson would pay face value for the gift cards, sell them at a discount and then cover the losses with incoming money from new customers/victims. Naturally, there must have been a time-laps between when Benson collect money for the discounted gift card to when she actually bought the gift card at the full value.

Eventually, Benson could not cover the losses and the ponzi scheme collapsed. She faces up to 20 years in prison.

Tip: Only Buy Discounted Gift Cards From a Reputable Company

ScripSmart recommends staying away from buying gift cards directly from an individual seller. Especially given the fact there are several companies in the secondary gift card market who offer a solid track record, free shipping and transaction guarantees. The same can't be said for Benson's business or any other individual sellers.

In fact, ScripSmart checks the inventory several times each day of two such companies: Cardpool and Plastic Jungle. We then display the results next to each gift card review. For example, if you're looking at the Home Depot Gift Card review on ScripSmart, you'll see Plastic Jungle is offering 6% discount and Cardpool is offering a 8% discount. Just look for a 'Gift Card Deals' section on the left hand side.

We like Cardpool and Plastic Jungle because they offer free shipping, transaction guarantees and have a solid track record of delivering on their promises. Remember, whether buying directly from the merchant or for the secondary market, check the Gift Card Score before making your next gift card purchase to ensure you're getting a quality product.

Employee Steals $90,000 In Eastbay Gift Cards - Convicted

Often when I think of gift card fraud, I think of crooks who are outside the walls of a company. However, a recent conviction reminds me how the biggest potential for fraudulent losses often comes from within an organization.

Case and point

Recently, a Wisconsin man, Ryan Stanley, was convicted of stealing over $90,000 worth of Eastbay Gift Cards from his employer. A former Eastbay manager, Stanley used the password of a coworker to activate the gift cards. He would cash out by selling the gift cards online below face value.

Restitution

In the end, Stanley will have to serve three months in Jail and pay all the money back in monthly installments of $300. If my math is correct, Stanley will be paying $300 monthly for the next 25 years. At age 29, Stanley will be making payments until he is 54 years old. 

Did Consumers Lose Out?

It's not clear if Eastbay canceled the gift cards after learning they were obtained fraudulently. Naturally, there were a lot of gift cards issuerd and in consumers hands when they company learned of the illegal activity.

This is one reason to prohibit the resale of a gift cards in the Gift Card Terms; however, I still believe consumers who rightfully purchase or are given a gift card should be able to sell it in a secondary market or privately between parties without running the risk of voiding the gift card.

Amway Settles Gift Card Lawsuit - Daily Deal Sites Should Take Note

Amway Gift Cardhoders have been given another shot.

As the result of a California lawsuit, Amway has agreed to redeem or replace more than $20 million in gift cards which have gone expired, at least in the the minds of consumers. That's because Amway placed the words "redeem before" on gift cards sold to consumers. Naturally, it was argued such a practice violated California Gift Card Law which prohibits expiration dates.

While Amway still denies the use of "redeem before" implies the gift cards has an expiration date, they are clearly wrong. We can all see it would be completely reasonable for a consumer to look at a gift card with a "redeem before" date in the past and think of the gift card as expired. This was an extremely deceptive practice.

Groupon And LivingSocail Should Take Note

One can't read the result of this case and without thinking about a recently lawsuit filed against Groupon in California. It's very similar: a Groupon Voucher clearly states an expiration date and the lawsuit argues such an expiration in in violation of California Gift Card Law. However, buried in the Groupon's own terms, it's disclosed that the "paid portion" of the voucher might be governed by state laws and may not expire.

The Proper Way To Operate: Full Disclosure

While it's reasonable for the promotional portion of a voucher to expire, it's likely the paid portion is governed by gift card laws. I recommend Groupon, LivingSocial and other daily deal sites begin clearly disclosing the expiration dates and dollar amounts for both the "paid portion" and the the "promotional portion" directly on each voucher sold.

Why Scratch Off Security Codes Should Be On All Gift Cards

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

Best Buy Gift Card

         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

Apple Store Gift Card

         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.