Gift cards emblazoned with the Visa logo may add some authority to the card, but they are just as susceptible to scammers as any other kind of gift card, according to money expert Clark Howard. That’s why Clark is warning consumers about a relatively new gift card scam that you need to be aware of.
This Visa Gift Card Scam Is Far From ‘Vanilla’
Clark cites news reports about scams linked to Visa’s Vanilla gift card, which have led to some high-profile litigation, including a class-action lawsuit.
In one of the lawsuits, filed in San Francisco, the card distributor, InComm, and Visa, are named as plaintiffs because its prepaid “Vanilla” branded cards are alleged to have inadequate security measures. Consumers reported that money was already taken from the cards when they purchased them and in some cases, the victims were not reimbursed.
This relatively new scheme in which crooks can swipe the money off the gift cards and then put them back as if untouched is called “card draining,” and Clark says it’s not good for your wallet.
What Is Card Draining and How Does It Work?
Card draining is a scam in which crooks steal gift cards and strip them of their money, recording key information in the process.
“Criminals will go in the store and grab a stack of these cards, they will go home, scrape off the numbers and put them back on the shelf at the store,” Clark says. “Then, people will buy them and you go to use it and there’s no money on it.”
Clark not only faults card issuers, but the retail industry as a whole for not putting any real safeguards in place to prevent criminals from accessing store display racks and draining the cards of their stated dollar amounts.
“The reality is that the security is so lame for gift cards,” Clark says. “The criminal element has completely figured this out, and with Visa, it’s just a shrug of the shoulders.”
In a statement to CBS Marketwatch, a Visa representative denied that there was a problem and said the allegations in the lawsuit were untruthful.
“We maintain an unwavering commitment to industry-leading security practices, including continually innovating to counter evolving fraudster tactics and collaborating with security experts, merchant partners, federal agencies and law enforcement to combat emerging threats and support industrywide solutions,” the rep was quoted as saying.
As I previously mentioned, Clark is generally not a fan of gift cards, although he does make exceptions from time to time.
Should You Buy a Visa Gift Card?
If you’re considering making a gift card purchase, Clark wants you to err on the side of caution for you and your wallet:
“Until and unless the industry decides that it actually matters to have some form of proper security on gift cards that are out on display racks, Do. Not. Buy. Them,” Clark says.
Gift Cards: How To Protect Yourself
But what if you already have one or several gift cards? What should you do then? Follow these steps to make sure you don’t end up with an empty card.
Inspect the Cards
Too many people buy gift cards without looking at them for more than a second, which is a no-no.
Always take a close look at the packaging before you purchase a gift card. Scrutinize the back of the card to see if it’s been tampered with or scratched off.
Use Them Fast
If someone gives you a gift card, Clark says you should use them quickly. If the business is in trouble, that gift card can become worthless.
“The restaurant and retail industries are unstable. Don’t let a gift card sit and gather dust,” he says.
Never Give Anyone the Numbers on the Back
The Federal Trade Commission (FTC) says, “Only scammers will tell you to buy a gift card, like a Google Play or Apple Card, and give them the numbers off the back of the card. No matter what they say, that’s a scam. No real business or government agency will ever tell you to buy a gift card to pay them.”
Final Thoughts
Card draining is a major problem in the gift card industry and Clark wants you to steer clear of it.
“When you see a gift card of any kind on a display rack out in the open, know that criminals can use the same method of operation to empty that card,” he says.
As a recap, Clark says it’s generally best to avoid gift cards. But if you really want to buy them, here’s how to stay safe:
- Inspect the cards closely.
- Use them quickly.
- Never give someone the numbers on the back.
Gift card scams are particularly popular around the holidays, but you can fall victim at any time of the year. Stay safe!
For more safe practices, read our guide on how to avoid gift scams.
