As the holiday shopping season is upon us, experts warn that scams involving fake gift cards are on the rise, catching more consumers off guard.
These scams typically involve consumers purchasing gift cards from third-party retailers, only to discover that the cards have no funds when they are used. Instead, the money loaded onto the cards is diverted directly to fraudsters.
“It’s getting worse. There’s a lack of safeguards. There’s a lack of processes in place, and Canadians are going to continue to be victimized,” cybersecurity and technology expert Ritesh Kotak tells Now Toronto.
Kotak says the scam is increasing mainly because it has become easier to carry out.
“They’re just replacing barcodes. They’re sticking new barcodes right on the package. So, when you go to check out and you’re putting $20, $50, or $100 on the gift card, you’re actually loading it onto the fraudster’s gift card,” he said.
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He adds that some methods are even more sophisticated, such as opening the packaging, tampering with the card information, and resealing it. Despite this, the crime continues to grow.
“[The fraudsters] could be located essentially anywhere in the world. They’re organized, and money can be transferred in a matter of seconds,” Kotak said.
Kotak’s warning comes as a Canadian TikTok user recently went viral after falling victim to one of these scams.
The user says she runs an annual Christmas charity for children and families and had purchased a gift card from Shoppers Drug Mart so a family could buy food for the holidays. However, she was later informed that the gift card did not work.
@alexisnicoleofficial Go Fund Me link in bio for this family. We were scammed at Christmas… watch this and @Shoppers Drug Mart please help us help this family. We’re a registered Canadian nonprofit but we run out of our living room and we’re small. #christmasscam #scammed #visascam #shoppersdrugmartbeauty #optimum ♬ original sound – ALEXIS NICOLE
She said Shoppers Drug Mart told her they could not help and advised her to call the card’s 800 number. She was then directed to a third-party organization, which told her they were aware of the scam and had opened an investigation.
“So, they’re opening an investigation, and this family does not have access to this money for seven to 10 business days while they do the investigation, and there is literally nothing we can do,” she said.
In a statement to Now Toronto, Loblaws, the parent company of Shoppers Drug Mart, said gift card fraud has been affecting the retail industry as a whole and confirmed it has since refunded the TikTok user.
“We’ve looked into this incident and have since refunded the customer and apologized for the inconvenience,” the statement said. “Our store teams are trained to recognize tampering and other fraudulent situations involving gift cards, doing their best to intercept suspicious transactions before purchase. That said, we understand this is a frustrating experience for customers.”
Kotak says retailers should take additional precautions to protect customers, including removing gift cards from store aisles and placing them behind the counter.
He adds that consumers can also reduce their risk by avoiding in-store gift card purchases altogether.
“Maybe look at e-gift cards and go directly to the official retailer’s website to purchase gift cards, instead of using a third party,” he said.
Kotak also recommends paying with a credit card, as it may allow for a chargeback process in the event of a dispute.
