Combat Retail Card Scams

Fraud through retail cards not connected to financial institutions can be damaging.


Fraudsters have breathed new life into old shams, taking advantage of the proliferation of retailer gift cards and the anonymity they offer. Unfortunaetly, members might not see the value of a financial institution product until they become victims of the lack of protection available through gift and prepaid cards.

Sweepstakes and lotto scams are popular forms of fraud. They work like this: An individual shows up at your member's door posing as the Publishers Clearing House or another reputable organization and tells your member they won a prize. Of course, there's a catch. To collect said prize, the member must pay the taxes on the prize upfront using retailer gift cards. Your member withdraws money from the nearest credit union ATM, hits a favorite retail store, buys gift cards, and gives the scammers the card validation numbers over the phone.

After that, the line goes dead. The call back number doesn’t work. The reality of what happened sinks in for your member, along with a heavy dose of anger, fear, and embarrassment.

It happened last month to a credit union member in Maryland, who withdrew $8,000 dollars from her account and bought 16 gift cards from a retailer, says NBC 4 Washington. Luckily, the unusual withdrawal caused the credit union to take notice. It called the police, who then froze the balance on some of the cards. The elderly victim admitted she would never have called the police on her own, saying she would have been too embarrassed to admit what happened.

Sweepstake scams are happening in Florida, too. These scams are occurring all over the nation and typically target economically vulnerable demographics.

Other gift card scams take place at the stores themselves. Thieves subtly open packaging, scan the numbers from the magnetic stripes, and use customer service to monitor the numbers for activation. Once the number is active, scammers use the information to make purchases online, beating the card owner to the punch.

Unfortunately, retail environments just aren't as secure as financial instutions. This is one more great reason for prepaid consumers to head to a financial institution and start establishing traditional accounts rather than uisng the services of an alternative provider.

And in light of fraud threats like these, credit unions that offer prepaid cards might want to consider limiting the number of cards memebrs can purchase in one day. Also, make it clear in communications what is and isn’t covered. Step-up education and present safer alternatives and you’ll not only prevent fraud, you’ll earn long-term trust and satisfaction.


July 10, 2012



No comments have been posted yet. Be the first one.