January 18, 2005, 12:00 AM

Gift cards’ popularity could mean more fraud, GiftCertificates.com warns

As online retailers make it easier for consumers to purchase and redeem gift cards online, they need to also take greater caution to prevent reselling-related fraud, according to Timothy Barefield, CEO of GiftCerticates.com, online seller of gift cards.

 

With the sale of gift cards skyrocketing nationally, the reselling of gift cards is growing proportionately and, along with that, the potential for gift card-related fraud. As online retailers make it easier for consumers to purchase and redeem gift cards online, they need to also take greater caution to prevent reselling-related fraud, according to Timothy Barefield, CEO of GiftCerticates.com, online seller of gift cards.

Although specific statistics about the extent of gift card fraud are not available, Barefield says the popularity of gift cards has increased the opportunities for holders of gift cards to resell unwanted cards on popular auction sites, such as eBay.com, as well as on dedicated sites that have sprung up to serve consumers looking to unload unwanted cards. And while most such opportunities represent legitimate sales where consumers are simply reselling gift cards they have received and don’t want or can’t use, the growth in card reselling has also created more opportunities for fraud. And it is difficult for consumers to detect whether the card being sold on an online site is authentic or not.

As a result of this growing fraud problem, retailers may want to take extra steps to protect their customers and their brand name reputation, Barefiled says. Although retailers may not be liable for losses associated with consumers purchasing cards of no value, they may not want unhappy sales experiences associated with cards with their names on them.

Most retailers have already taken a number of actions to cut back on gift card fraud in their brick-and-mortar outlets, Barefield says. Most, for example, do not retain value in the cards sitting on the shelf or racks in their stores due to the easy ability for criminals to steal the cards. Instead, value is typically loaded at the point of sale when the purchaser pays for the cards.

Similarly, retailers may want to take extra precautions to prevent fraud with cards purchased online. One of the most common means of such fraud is for criminals to use stolen credit card numbers to purchase cards. As a result, retailers need to use their most stringent fraud protection systems to determine that gift card purchases are being paid for with legitimate credit cards.

Also, GiftCertificates.com sells a Super certificate that cuts down on the need for reselling cards. Gift givers unsure of which stores a recipient shops at can send the recipient this electronic gift certificate which can be redeemed at the GiftCertificates.com site for a gift card to a specific retail chain that the recipient chooses. That should cut down on the need for reselling cards by making sure the recipient gets a card he or she wants to use, Barefield says.

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