Companies looking for the perfect holiday gift for valued employees or customers may be tempted to buy prepaid gift cards as a convenient, one-size-fits-all solution. If yours is one of those businesses, you might want to think twice. Gift cards are vulnerable to theft; numbers can be stolen from stores and gift card accounts can be hacked online.
Thieves spot an opening
Gift cards offered by credit-card companies are commonly used by organized crime, including street gangs, because they often have no load limit and can be used to withdraw cash at ATMs. No bank account is needed, which means funds loaded and withdrawn are not traceable. In fact, these types of cards are accepted as valid currency between some crime syndicates.
Their use in money laundering makes the cards particularly attractive to thieves. So, you might want to buy only cards issued by individual retailers.
Stealing from stores
Though less risky, retailer gift cards also are vulnerable to theft. Fraud perpetrators might copy or photograph gift card numbers in stores and then wait for people to buy and activate them at the cash register. They can monitor card numbers online and when the accounts become active, spend the balance or convert it to cash via a third-party card redeemer before the gift card recipient gets a chance to spend it.
Cards that include PIN numbers hidden by a scratch-off coating can be more secure. However, thieves can steal these cards, scratch off and record the PIN numbers, re-coat the numbers, and return them to store racks.
Criminals also can get ahold of gift card numbers by hacking the systems of major retailers. One of the latest methods of stealing many cards at once is to use a bot (a computer program that works automatically) to scour the Internet for gift cards with balances.
Protect balances
If you decide to give gift cards this year, take steps to protect them. Buy cards only from reputable retailers and avoid buying them off open racks that are easily accessible to fraud perpetrators. Also, encourage your gift recipients to redeem their cards quickly. The longer they wait, the more time thieves have to deplete their balances. For more information on protecting your business from fraud, contact us.