Prepaid Gifts Can Present Problems

Gift cards make great last-minute gifts for holiday shoppers. They are practical, inexpensive and convenient. According to a new report by advisory company CEB TowerGroup, sales of gift cards have risen to $124 billion this year—a 55 percent increase over six years.

While gift card giving increases, Better Business Bureau serving Alaska, Oregon and Western Washington warns shoppers that gift card scams are on the rise, too.

This holiday season, BBB encourages consumers to watch out for the following:

• Digital theft: Cybercriminals create a website and pose as an online retailer. When consumers enter their gift card information to make a purchase, the scammers clean out the balance.
• Physical theft: Thieves visit stores and collect gift card information, then continually check the card number until they see the card has been purchased and activated. They then immediately use up all of the funds.
• Fake or used-up secondhand cards: Scammers post gift cards to online auctions or classified sites and offer discounted prices on counterfeit or already-used cards. It is virtually impossible to tell whether the cards have any value remaining, to determine whether they’ve been tampered with or to see if they’ve expired.

BBB offers practical advice to consumers shopping for gift cards.

• Purchase straight from the source. Buy cards directly from the issuing store, no matter how much cheaper they may be elsewhere—especially when shopping for gift cards online. An illegitimate card is a worthless gift.
• Examine cards carefully. Thoroughly inspect cards and do not buy them if they have been tampered with or altered.
• Read the terms and conditions. Make sure the recipient won’t get hit with transaction or inactivity fees that will erode the value of the card. If you are giving a gift card to a friend who wants to shop online, make sure the card can be used that way and not just in a store.
• Ask cashiers to scan and verify cards. Have gift cards scanned and activated at checkout and ask your cashier to verify the balance before leaving the store.
• Keep the receipts. Many retailers can track where cards are purchased, activated and used. They may be able to replace stolen cards with proper proof of purchase.

It is estimated that $750 million in gift cards will go unredeemed this year. However, legislation passed in 2010 states that the money on prepaid cards cannot expire for at least five years, even if the card’s expiration period is shorter. Learn more about consumers’ gift card rights from the Federal Trade Commission.