A Popular Payment Method Scammers Want You to Use

Jul 26, 2019
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Although crypto-currencies like Bitcoin and Monero are often associated with attempts by criminals to evade detection, consumer watch groups point to another medium of exchange that should not be overlooked when it comes to illicit dealings. As AARP tells it, gift cards have become the new currency of fraud, citing FTC figures revealing that people reported losing money to a scam involving gift cards at a level that more than tripled between 2015 and 2018. To help prevent those you love from falling victim to these schemes, here’s an overview of what you should know:

A request for payment by gift card is a major red flag: From IRS impersonators demanding immediate payment for back taxes to charlatans claiming to be priests seeking charitable donations, a common practice among con artists is to insist on payment via gift cards from major brands and retailers such as Target, iTunes, Google Wallet and many others. Sometimes delivered in a threatening phone call, these demands are often designed to convey a sense of urgency about a matter that requires immediate payment. In many cases, the scammer will demand that the potential victim purchase gift cards, and then provide the codes or PINs over the phone.

Why gift cards are so popular among crooks: Because they are easily transferable and almost as untraceable as cash, fraudsters often sell gift cards on the secondary market. For this reason, it’s important to exercise caution when buying a gift card from an auction site or third-party website. As the Better Business Bureau explains, you could end up with a card that has no value, is expired or was fraudulently obtained. You could also buy a gift card that has the actual balance on it when you make the purchase, but is then spent by the seller who has stolen the code before you even receive the card.

The stakes are high: It’s quite common for criminals to demand thousands of dollars in gift card value from potential victims. For instance, a report from Green Bay, Wisconsin featured a man that was swindled out of $1,500 after responding to a letter to recruit him as a mystery shopper. Before realizing the assignment was a sham, he had cashed a counterfeit check to cover the costs of gift cards for Best Buy and Walmart, purchased the cards and turned their numbers over to the scammer. In another case covered by Gary Weiss in AARP magazine, a woman was nearly bilked out of $1,000 in Google Play gift cards she planned to purchase as a “down payment” for $5,207 in back taxes she supposedly owed. She had just received a threatening call from a man purporting to be an IRS official, who informed her that she must pay up or face jail time. Before the transaction was completed, an informed store clerk interceded on her behalf.

How stores are fighting back: As Weiss explains, major retailers have been stepping up efforts to curtail the fraudulent use of gift cards in response to an increase in these types of crimes. This includes training staff on how to recognize the signs of a customer who may be buying gift cards in the process of becoming a victim of a scam. In 2018, Best Buy, Walmart and Target also began limiting the dollar amount that can be placed on a gift card in one transaction, and implemented new restrictions on the use of gift cards to purchase other cards.

How to defend against gift card scams: If you’re concerned about your elderly relatives or anyone who might be vulnerable to efforts to defraud them via gift cards, be sure to let them know that no legitimate business or organization will request payment in the form of a gift card or reloadable prepaid card. When buying gift cards in stores, check the packaging for any evidence of tampering and make sure the PIN or code is not exposed. And If you or someone close to you has made payment to a scammer in the form of a gift card, it’s a good idea to call the company that issued it right away. Although it’s very difficult to recover these funds since gift cards essentially function like cash, some issuers may do this for a fee. You can find contact information to several of the gift card providers that are used most often at the FTC’s website here. Finally, report the incident to the FTC’s Complaint Assistant.
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