Posts Tagged: gift card fraud

Dec 17

Buyers Beware of Tampered Gift Cards

Prepaid gift cards make popular presents and no-brainer stocking stuffers, but before you purchase one be on the lookout for signs that someone may have tampered with it. A perennial scam that picks up around the holidays involves thieves who pull back and then replace the decals that obscure the card’s redemption code, allowing them to redeem or transfer the card’s balance online after the card is purchased by an unwitting customer.

Last week KrebsOnSecurity heard from Colorado reader Flint Gatrell, who reached out after finding that a bunch of Sam’s Club gift cards he pulled off the display rack at Wal-Mart showed signs of compromise. The redemption code was obscured by a watermarked sticker that is supposed to make it obvious if it has been tampered with, and many of the cards he looked at clearly had stickers that had been peeled back and then replaced.

“I just identified five fraudulent gift cards on display at my local Wal-Mart,” Gatrell said. “They each had their stickers covering their codes peeled back and replaced. I can only guess that the thieves call the service number to monitor the balances, and try to consume them before the victims can.  I’m just glad I thought to check!”

In the picture below, Gatrell is holding up three of the Sam’s Club cards. The top two showed signs of tampering, but the one on the bottom appeared to be intact.

The top two gift cards show signs that someone previously peeled back the protective sticker covering the redemption code. Image: Flint Gatrell.

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Dec 15

The Role of Phony Returns in Gift Card Fraud

On any given day, there are thousands of gift cards from top retailers for sale online that can be had for a fraction of their face value. Some of these are exactly what they appear to be: legitimate gift cards sold through third-party sites that specialize in reselling used or unwanted cards. But many of the more steeply discounted gift cards for sale online are in fact the product of merchandise return fraud, meaning consumers who purchase them unwittingly help thieves rob the stores that issued the cards.

giftcardsThis type of scam mainly impacts brick-and-mortar retailers that issue gift cards when consumers return merchandise at a store without presenting a receipt. Last week I heard from KrebsOnSecurity reader Lisa who recently went online to purchase a bunch of steeply discounted gift cards issued by pet supply chain Petco.

Lisa owns two Rottweilers that both eat a good chunk of their weight each month in dog food, so Lisa said she felt like she’d really hit on a bargain when she found a $165 Petco gift card for sale at a popular online gift card retailer for $120 (a nearly 30 percent discount on the value).

“When I went to Petco to get my monthly supply of dog food and snacks for my Rotties, I used my merchandise card and the manager shared with me that folks are stealing merchandise from one Petco store and returning the items to another without a receipt and then selling the cards to places like and at a discounted price,” Lisa recounted.

Petco’s official policy is that for returns more than 60 days after the purchase — or if the receipt is unavailable — the value of the goods returned will be refunded to a merchandise card. Lisa said she bought the Petco card from, but she said the company never disclosed that the card was a merchandise return card — a fact that was printed on the front of the card she received.

“I feel really bad now because my purchase of these cards may have contributed to unlawful activities,” Lisa said. “Even though I saved $40+, Petco actually lost money as a result.”

Neither Raise nor Petco responded to requests for comment. But a look at the available Petco cards for sale via one gift card tracking site — — shows Petco cards routinely sell for at least 25 percent off their value.

In any case, this fraud scheme is hardly specific to Petco. Cards from Petsmart, a competitor that also offers merchandise return cards, generally sell at 20 percent off their value. Clothier H&M’s cards average about 30 percent off.

Contrast these discounts with those for gift cards from restaurants, fuel stations and other businesses that generally don’t have to deal with customer returns and you’ll notice two interesting patterns: For starters, the face value of the cards from merchants that don’t take customer returns are far more likely to be even amounts, such as $50, $25 and $40. The percentage off the face value also tends to be much lower — between 3 and 15 percent. For example, see the discount percentage and value of cards from Starbucks and Chevron.

“Twenty-five percent off is really high, and there aren’t many that offer that high of a discount,” said Damon McCoy, an assistant professor of computer science at New York University and an expert on fraud involving stored value cards. “Normally, it is around 5 percent to 15 percent.” Continue reading →