Note: Originally, I wrote this in December of 2016, but it's definitely worth a reminder.

Ninety-three percent of Americans have given a gift card. The total volume of gift cards is projected to reach $160 BILLION by 2018. Gift cards are an easy gift to buy. You don't have to worry about getting the wrong size or style. The recipient gets to choose whatever they'd like. I have given many, many gift cards over the years, but this time, I was scammed.

On November 26, 2016, I bought a $40.00 Wal-mart Visa gift card in Sioux Falls for my friend's daughter's 16th birthday. She tried to use it on December 3, 2016 and it was denied. Kind of embarrassing for a 16-year-old.  She went home and logged on to the website provided on the back of the card, registered the card and realized there was a zero balance. There were a list of small transactions at several McDonald's in California. (Hope you enjoyed your McCafe Latte, loser!)

A few years ago, my credit card number was stolen, not my identity, just my card number. Two transactions of $150 were made at two separate Wal-mart's in Florida. I contacted the Sioux Falls Police Department regarding those charges and filled out a police report. Within a few days, my bank returned the $300 to my account. The police officer I spoke with said, "It's not a matter of 'if' it will happen to you, it's a matter of 'when'." He suggested that in this case, the thieves were probably at the credit card processing center the store was using. I don't know what store I had been to that had the breach. Even though my credit card number was used at Wal-mart to make the fraudulent purchases, doesn't mean that is where the breach happened.

So, how did this happen with my gift card? This is a fairly new scam and we're going to start to see more and more of it.  You need to be aware of this. According to Jessie Schmidt of the Better Business Bureau, thieves will go into a store that has gift cards displayed on kiosks. They'll take a few of them, go into the bathroom or take them home and copy the card number and PIN number and then return them to the display. The thieves then watch the account online or call the 800 number on the card and wait until the card is activated and then they get busy, draining the account within days, if not hours.

How does the thief get away with this? From what I've read online, they carefully take a razor blade and cut the gift card packaging open to reveal the card number and PIN number and if you can believe this - there are actually scratch off stickers for sale on the internet, so you can replace the sticker you scratch off.


Then, the thieves transfer your card number to another card (skimming) using, again, something you can buy on the internet called a Magnetic Credit Card Writer, or a thief will apply a bar-code sticker over the genuine bar code. When the sticker is scanned, it activates a blank card that the crook has stolen instead of the card the consumer is purchasing.

Are you mad yet?

How can you protect yourself and hopefully prevent gift card theft to make sure your loved one isn't getting an empty gift card under the tree this holiday season?  Here are a few tips from the Better Business Bureau and the Scambusters website:

  1. Don’t buy gift cards from online auction sites. Since this is a large source of gift card fraud, these cheap gift cards may well be worthless to you. Sure, some of these cards are real, but many are stolen, counterfeit or used. It’s not worth the risk.
  2. Only buy gift cards directly from the store issuing the gift card or from a secure retailer’s website — no matter how much cheaper they may be somewhere else. If you do buy a gift card online, make sure you buy it from the place that you plan to use it.
  3. Don’t buy gift cards off of publicly displayed racks in retail stores. In addition, don’t assume that because gift cards are inaccessible to the public, they are safe. After all, store employees can participate in gift card scams too.
  4. Always carefully examine both the front and back of a gift card before you buy it. If you can see a PIN number, put the card back and get a different one. If a gift card looks like it could have been tampered with, don’t buy that gift card.
  5. Always ask the store cashier to scan the gift card in front of you. This will guarantee that your card is valid when you buy it and that it reflects the balance you just charged it with. This will also protect you from crooks who exchange worthless cards for the cards you think you are buying.
  6. Always keep your receipt as a proof of purchase as long as there is money stored on the gift card. Since many retailers can track where the gift card was purchased, activated and used, if the card is stolen, some retailers will replace the card for you if you have your receipt.
  7. If possible, register your gift card at the store’s website. Although not all stores offer this option, you can uncover any misuse of your gift card sooner and report it more quickly.
  8. Finally, never, ever give your Social Security number, date of birth or any other unneeded private information when you purchase a gift card. No reputable company will ask for this info.

How can this type of fraud be combatted? You know that chip in your credit or debit card? Yep, that chip along with a PIN number could drastically curb credit card fraud if used together. Read more about that here.

Consumer Reports recently wrote an article about gift card fraud. You can read it here.

For several years, I've purchased gift cards at Metabank. They offer no fee gift cards during the holiday season. Make sure you take cash to purchase your cards. There may be other banks offering that same deal, but Metabank is the only I know of. If you know of another bank, feel free to put it in the comments below.

If you're wondering if my friend's daughter got her money back from the Wal-mart Visa gift card, the answer is, no. The 800 number on the back of the card is basically useless and the website is no better. She filled out a dispute using information from the website and we never heard anything. I guess we'll call it a lesson learned.

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