Fact or fiction: The top payment method for imposter scams in 2018 was gift or reloadable cards.
Fact or fiction: In 2018, there were 77.9 million in total dollars lost (reported) with gift cards or reloadable cards used as a payment method.
Fact or fiction: There were nearly 550,000 imposter scams reported in 2018.
Curious about the answers? All three are facts according to the Federal Trade Commission (FTC).
Over the past year there’s been a significant increase in using gift or reloadable cards for payments surrounding imposter scams. Since 2015, the top payment method for fraudulent activity had been wire transfer however, in 2018 there was a shift to gift or reloadable cards.
And the trend continues; within the first quarter of 2019, gift or reloadable cards were the top payment method for imposter scams. According to the FTC, gift cards are attributed to a 20.2 million dollar loss in reported fraudulent activity.
But gift card scams aren’t new. They’ve been around for years, causing consumers and retailers time and expense. We’ll delve deeper into the gift card scams by type and how to avoid them altogether.
Have you ever been to a grocery or convenience store that had a gift card display rack? You know, the kind that features popular retailers such as Target, Fandango, Amazon and The Cheesecake Factory? These types of displays are the go-to for last-minute gifts but are a potential hub for hackers. Wondering how?
It’s all in the numbers. Literally. Have you ever looked at the back of a packaged gift card? The card number is typically exposed, leaving it vulnerable to hackers. Simply put, someone can take a card off the rack, quickly jot down the numbers and scratch the protectant strip covering the PIN. If you think you’ll notice the PIN has been exposed, you may want to think again. Those little silver strips can be replaced. In fact, you can even order them online. The hacker then replaces the strip and voila, no one knows the number was exposed…
Until a consumer attempts to make a purchase. You see, there is special software that notifies the hacker once a gift card has been activated. ‘"The crooks can see as soon as someone activates the card, because they've automated all this with software that periodically checks the card balance via the internet," says David Farquhar, a unit chief within the FBI's Criminal Investigative Division who explained the crime techniques to Consumer Reports last year.’
So, what can be done to protect the integrity of the gift card? You may want to consider purchasing gift cards from stores that keep them behind the counter and only accessible to employees.
Do you think that plastic gift card in your wallet is safe from fraudulent activity? Or how about that eGift you received for your birthday that’s sitting in your inbox? You may want to think again.
The GiftGhostBot, a bot that compromises consumers’ gift cards, allows for scammers to deplete the cards’ funds. Gift card numbers and PINS are scanned and tested by the bot in an attempt to access gift card accounts. Once a combination of numbers has been verified by the scammer, they will then sell the gift card account details including the number and PIN.
What does this mean for the consumer? “Any customer who is an unfortunate victim of the crime may see that their gift card has run out of funds. The bot is capable of running through a whopping 1.7 million accounts in just an hour,” explains Anu Passary of Tech Times.
Remember to keep a close eye on your gift card’s balance (and takes screenshots) a few times a month to ensure no suspicious activity is occurring with your card.
On average, how many times do you receive an unknown phone call throughout the day? Those attempts at communication, especially shortly after tax season, may have been a criminal pretending to be associated with the IRS.
Whether this is your first time hearing about this type of gift card scam or you’ve personally experienced it in the past, the initial phone conversation with the criminal can be surprising. You may think, “Wait, I owe money?! This can’t be true.”
But how can you tell if this is a legitimate issue or a gift card scam?
It’s imperative to remember that the IRS will not initially contact people via phone, email or social media. Instead, their first communication is typically through mail delivered by the U.S. Postal Service.
The IRS does not and will not:
Another red flag is that scammers often require payment through gift cards; keep in mind that the IRS and private collection agencies will never ask for payment in the form of a gift card. A full list of payment option accepted by the IRS can be found through their website. If you’ve been contacted and are concerned of the legitimacy, review this helpful tax scam article from the IRS.
And, when in doubt, directly reach out to your local IRS office for verification. You can also inform any suspicious scams or activity to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484.
Millions of dollars have been lost through fraudulent phone scamming activity according to the IRS. Unfortunately, it doesn’t stop there. Personal information such as social security numbers and addresses are also at high risk of being compromised with this type of scam.
As gift card scams become more refined, it’s crucial to be conscious of suspicious activity.
Looking for something to give other than a gift card? You may want to consider an alternative. For example, GiftYa is an app that texts personalized gifts within seconds and can be purchased for any local or national merchant. You can send someone a GiftYa for an experience (say, a trip to the zoo), a dinner at their favorite restaurant or a shopping trip to JCPenney.