Santosh, Internet ScamBusters Newsletter #209, 12-13-2006

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Internet ScamBusters (tm)
The #1 Publication on Internet Fraud
http://www.scambusters.org

By Audri and Jim Lanford
Issue #209 December 13, 2006

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Hi Santosh,

Today we have a Special Issue for you called "New Gift Card
Scams: 8 Tips to Protect Yourself."

If you watch the news, you've probably already heard a lot
about the gift card scams that have been going around this
holiday season.

We'll certainly tell you all about these scams. However, the
much more common gift card scams are NOT what you've been
hearing about. So, we'll focus on the biggest gift card scams
this holiday season -- and how to protect yourself.

First, though, we recommend you check out the most popular
articles from our other sites during the past week:

Great Gift Ideas for Coffee and Tea Drinkers
http://www.wowgiftideas.com/great_gift_ideas_for_coffee_and_tea_drinkers.html

Dealing with Credit Card Late Fees
http://www.creditcardtipsetc.com/dealing_with_credit_card_late_fees.html

Multiple Uses for Old Christmas Cards
http://www.aboutchristmascrafts.com/multiple_uses_for_old_christmas_cards.html

How to Respond to a Dental Emergency
http://www.emergencypreparednesstips.org/how_to_respond_to_a_dental_emergency.html

How to Buy Gifts for Coworkers
http://www.christmasrants.com/how_to_buy_gifts_for_coworkers.html

Start a Christmas Club for Christmas 2007
http://www.consumersavvytips.org/start_a_christmas_club_for_christmas_2007.html

On to today's Special Issue...

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New Gift Card Scams: 8 Tips to Protect Yourself
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The Gift Card Scam on the News

Let's first talk about the gift card scam that's making news.
It's actually quite clever. Here's an example of the email
going around:

--- Begin Email ---

The crooks have found a way to rob you of your gift card
balance. If you buy Gift Cards from a display rack that has
various store cards you may become a victim of theft.

Crooks are now jotting down the card numbers in the store and
then wait a few days and call to see how much of a balance
THEY have on the card. Once they find the card is "activated,"
they go online and start shopping.

You may want to purchase your card from a customer service
person, where they do not have the Gift Cards viewable to the
public.

--- End Email ---

As bogus as this may sound, it can actually happen. The good
news is that, so far, it hasn't happened very often.
Nonetheless, according to KOMO TV in Seattle, Wal-Mart
shoppers have already been hit with this scam.

Here's how this works:

Gift cards have a unique number in a magnetic strip that is
used to track usage and outstanding balances. This usually
works well, and has the benefit that you often won't lose your
remaining balance if you lose the gift card, since you can
simply call to report the card as stolen or lost.

Now imagine that a scammer comes into a store that displays
gift cards on public racks (such as Wal-Mart) with a small and
inexpensive mag-strip scanner in his pocket. This scanner can
easily read and store the unique gift card serial numbers.

So, the scammer simply grabs some of these gift cards from the
rack, finds a quiet place and quickly scans each card to get
its unique serial number. They then put the cards back (or
leave them somewhere in the store) since they are done with
them.

(Incidentally, this high tech approach isn't even needed. The
crook can simply copy the unique numbers by hand on a pad of
paper. However, this is much more time consuming.)

Depending on the gift card packaging, this can be very easy to
accomplish or the crook might need to pry the gift card from
its base and then carefully reposition it back after stealing
the number. In either case, it's not very difficult for the
scammer to do this.

Next, real customers come in to buy some of these gift cards
and "charge" them with real money.

How does the scammer know which gift cards have been charged?
Every few days, he simply calls the gift card phone number and
enters the unique numbers to find out which cards have been
charged -- and what the remaining balances are.

Most of these systems don't require a password, so it is VERY
easy for the scammer to do this. Other times the scammer is
able to steal the PIN at the same time as the gift card
number.

And since most of these gift cards aren't given to the
recipients until Christmas, most of the cards will be fully
charged!

The scammer can then go on a shopping spree and drain the gift
card balances.

If scammers are somewhat more technically sophisticated, they
can even purchase a similar real gift card, charge it with $5,
and then reprogram the card with a stolen unique ID number --
and use the card to physically shop in the store instead of
being "limited" to shopping only online.

According to KOMO TV, a Wal-Mart spokesman says the company
"is working with law enforcement at the highest levels
possible to rectify the problem and catch the people
responsible."

The National Retail Foundation (NRF) confirmed this scam was
occurring last week in a press release, and said: "Reports
about a new gift card scam detailing how consumers could lose
money from gift cards if criminals steal the card numbers from
the back of the card are accurate but somewhat misleading."

ScamBusters Recommendation: Even though this type of gift card
scam is now only occurring on a very small scale, we still
advise that you don't buy gift cards displayed on public racks
since this scam is so simple for scammers to execute. Why
take the chance?

We also recommend you follow the eight tips for protecting
yourself that we outline below.

Little Known Gift Card Scams That Actually Pose a Bigger
Threat This Holiday Season

With gift card sales estimates at $24.81 billion this holiday
season (up from $18.48 billion last year according to the
NRF), it is not surprising that there are bigger gift card
scams going on right now, even if the one on the news is
overstated.

According to experts, there are three MUCH more common types
of gift card scams:

1. Used, counterfeit and fraudulent gift cards are being sold
on auction websites.

2. Sellers often overstate the value of real gift cards they
are selling on auction websites, so buyers don't get what they
think they are purchasing.

3. Scammers are using stolen credit cards to buy gift cards
and then selling these gift cards for cash, either at online
auction sites or elsewhere.

In other words, auction gift card scams now pose a much bigger
threat than gift cards displayed on public racks in stores.

Here are two other current gift card scams:

- Crooks swap blank gift cards that they stole on previous
trips to a store for cards activated by clerks when they
purchase them. Since the clerks don't realize that the
returned cards are blank rather than the ones just purchased,
the scammers are able to steal fully charged cards.

- Thieves also carefully open the packaging of new gift cards
and replace them with used, worthless cards. When the card is
sold, the gift card the scammer has in his possession gets
activated, rather than the worthless used card that the real
buyer has. (This will only work on some types of cards.)

8 Tips for Protecting Yourself From Any Gift Card Scam:

There are plenty of things that you can do to protect yourself
from gift card scams. And the best part is that none of these
things will take more than a few minutes.

Just follow these eight simple tips to make shopping for gift
cards safer:

1. Don't buy gift cards from online auction sites. Since this
is a large source of gift card fraud, these cheap gift cards
may well be worthless to you. Sure, some of these cards are
real, but many are stolen, counterfeit or used. It's not
worth the risk.

2. Only buy gift cards directly from the store issuing the
gift card or from a secure retailer's website -- no matter how
much cheaper they may be somewhere else. If you do buy a gift
card online, make sure you buy it from the place that you plan
to use it.

3. Don't buy gift cards off of publicly displayed racks in
retail stores. In addition, don't assume that because gift
cards are inaccessible to the public, they are safe. After
all, store employees can participate in gift card scams too.

4. Always carefully examine both the front and back of a gift
card before you buy it. If you can see a PIN number, put the
card back and get a different one. If a gift card looks like
it could have been tampered with, don't buy that gift card.

5. Always ask the store cashier to scan the gift card in front
of you. This will guarantee that your card is valid when you
buy it and that it reflects the balance you just charged it
with. This will also protect you from crooks who exchange
worthless cards for the cards you think you are buying.

6. Always keep your receipt as a proof of purchase as long as
there is money stored on the gift card. Since many retailers
can track where the gift card was purchased, activated and
used, if the card is stolen, some retailers will replace the
card for you if you have your receipt.

7. If possible, register your gift card at the store's
website. Although not all stores offer this option, you can
uncover any misuse of your gift card sooner and report it more
quickly.

8. Finally, never, ever give your Social Security number, date
of birth or any other unneeded private information when you
purchase a gift card. No reputable company will ask for this
info.

And that's it.

Gift cards are convenient and make great gifts. Following
these easy tips will help you ensure the person you buy the
gift card for is the one who benefits from it!

Time to close -- we're off to take a walk. See you next week.

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