Scammers Hit Grocery Store Gift Card Kiosk, Swap Out Empty Cards For New Ones

Jeff is a really generous boss. This past holiday season, he gave out $100 gift cards to various stores as gifts to his staff. He picked them up at one of those gift card malls that you see in grocery and drug stores: in this case, at grocery chain Ralph’s. When his employee went to actually use the card this week, it wouldn’t work. Normal gift card snafu? No. The grocery store blames card-switching thieves.

Curious if you’ve run across this issue previously. For Xmas, I purchased gift cards for members of my staff. To make life easy, I went to Ralph’s and purchased gift cards for Bed, Bath and Beyond, Home Depot and Best Buy. I happily handed them out and figured that was the end of it.

Two days ago, one of my employees humbly pointed out that the Best Buy card for $100 (yeah, pretty generous huh!) did not work at Best Buy. Frustrated, I went to Ralph’s tonight to sort it out.

The manager suggested I call their 800 number to sort it out. I insisted that he call them for me (figuring it would be a frustrating call). I was right. After about 25 minutes on the call, the customer service person for Kroger (parent company of Ralph’s) explained that most likely I was a victim of fraud. Puzzled, I asked to speak with the customer service rep on the phone to clarify. The rep said that thieves will take the original gift card and replace it with a fake (or different one). They keep the original one and then when a customer like me buys the card, they apparently scan the gift card holder (which apparently has the original number) and that activates the (now stolen) card. Of course, the card I left with is never activated.

The rep finally said they would open a case and I should hear back in 3-5 days and possibly they will send a replacement card. I don’t have a tremendous amount of faith in this, but will wait and see.

What frustrated me was:

1) their insistence that I was a victim of fraud. Actually, I bought merchandise from them and they should stand behind this. They sold it. It’s not like I bought the card off of ebay or craigslist!

2) The fact that they are aware of this problem and totally acknowledge it is frustrating. Why not keep the “real” cards behind a desk or locked up to help prevent this. They can still have your ugly displays, just do what Costco does and have the real thing in a safe place.

3) Stand behind your product. I should have been refunded there on the spot. They had all the info to confirm my purchase and admitted that. But that’s not their process. Instead I now need to wait for a replacement (if it comes).

What I’ve learned is to never buy gift cards from a supermarket or big box store, but rather only from the actual store that I (or whoever will get the card) am going to use the gift card at. I’ll suffer through a trip to Best Buy to purchase that gift card because at least I’ll know that they’ll sell a real one and activate it properly.

Has anyone else had this issue? Just curious.

Comments

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  1. newmie says:

    wow! that really stinks.

    • Jawaka says:

      I have to admit while thieves and scammers like these suck they’re also pretty ingenious.

  2. Rebecca K-S says:

    Wait, why the hell is he offended that they’re saying he was a victim of fraud?

    • Ben says:

      He’s not offended, he’s frustrated. And he explained why — “Actually, I bought merchandise from them and they should stand behind this. They sold it. It’s not like I bought the card off of ebay or craigslist!”

      Reading is fun!

      • Rebecca K-S says:

        His tone reads pretty defensive, not just frustrated. It’s not that I fault him for being frustrated with the situation; it’s just very strange to me that he’s all, “How dare they suggest I am a victim of fraud!”

        Reading is fun. So are puppies!

        • AlteredBeast (blaming the OP one article at a time.) says:

          I viewed it as him saying, “I’M not the victim of fraud! Ralph’s is the victim of fraud, I’m a victim of Ralph’s letting this happen often enough that they are already aware of the issue.”

      • The Porkchop Express says:

        -damental!

    • TeriLynn says:

      Probably because it sounds like they’re taking themselves out of the issue, implying that they have no responsibility in the matter.

    • KeithIrwin says:

      Because the perpetrators didn’t defraud him. They defrauded Ralph’s. They stole cards from Ralph’s and then Ralph’s sold him useless cards. Ralph’s should be replacing the useless cards it sold him or activating the actual cards it sold, not making excuses. They’re the merchant and, thus, they’re the ones with the legal responsibility for the quality of the product. He’d be completely within his rights to do a chargeback if this is true for all of the cards they sold him.

      That said, I would like to point out that, from the available facts, it’s possible that maybe the person at the register just messed up and forgot to activate the cards. I would check into that, if I were him.

      • Selunesmom says:

        The way that gift cards work now, the bar code on the back of the card or on the holder is scanned, and once the transaction is completed (paid thru), the card is activated. There isn’t anything for the cashier to do to activate them beyond ringing them in the first place. If the customer was charged for the card, then as far as the cashier’s job goes, he or she did everything right.

  3. frank64 says:

    They were the victim of fraud, not you. They will eventually make it right, but they should do it now. It is like buying a empty box where you can prove it was empty when you bought it.

    • kosmo @ The Soap Boxers says:

      That was my initial impression when I saw the headline. However, after reading the article, my thought is that the customer is indeed being defrauded and that the perps are using the store as an unwitting accomplice.

    • Jawaka says:

      No matter who’s the actual victim of fraud is someone’s getting screwed in the end.

  4. VerdaMontufar says:

    Probably something similar to this. I wonder if they still have lax security on their gift cards – Fred Meyer is also owned by Kroger.

    http://www.oregonlive.com/beaverton/index.ssf/2010/08/beaverton_man_steals_thousands_from_stores_by_cloning_gift_cards.html

  5. nbs2 says:

    I’m going to blame the OP here. Not for what happened, but for his reaction.

    First, I’m going to make a supposition. That is, that Kroger wants to use whatever resources they have to verify that his story checks out (e.g. look to see if he has made serial complaints like this) to make sure that they are not being defrauded. Second, I’m going to make an observation based on what I’ve seen. That is, that the gift cards at the retailer are the same as those at the megamart – they use the same activation and all. It isn’t like BB has their gift cards under lock and key. Your chances will be no better at BB than they were at Ralph’s.

    I wish him the best, just maybe a deep breath would be good (I know, it is frustrating to get burnt like this). I hope that he advised Kroger that he bought multiple cards on that trip – I’d hate to see him get burned after his account is noted for having multiple complaints. If the cards were bought with a CC, you may have buyer protection available. If not, since they were business purchases, can the cost be written off (not a tax expert, I really am curious)?

    • ZachPA says:

      The gift cards you see in grocery stores and at non-affiliated stores (i.e. the Outback card you can buy at Target) are typically NOT the same gift cards you could purchase directly. Gift card malls are typically run by third-party companies who do all of the legwork.

      Gift-card mall operators rent space from storefront operators to display gift cards, and they kick cash back to the store owner for every card purchased. They get the remainder of the sale, keep some for themselves, and then send the rest off to the retailer.

      It’s a win-win-win-win situation. The consumer can have a one-stop shop for many different types of gift cards. The store owner has kickbacks from the sale thereof. The retailer gets a guaranteed sale for doing absolutely nothing, while the gift card mall operator does all of the legwork, advertising, printing, fulfillment and money transfer.

      The only time it is not a win-win-etc situation is when there is fraud afoot. Then, everyone tries to pass the buck to everyone else, and it usually leaves the purchaser stuck for it somehow.

      The best way to avoid this type of situation is to always (ALWAYS) use a credit card (not a debit card) to purchase the gift cards. This way, if there is a fraudulent situation like in the OP, your credit card issuer can charge back the purchase. You cannot do that with cash or debit. It’s unfortunate that the store owner is usually left holding the back in such a case, but then again, it is usually from the store that thieves steal the cards and replace with different cards.

    • BigSlowTarget says:

      As a business you write off close to all business expenses (the difference comes from what the IRS and what businesses think of as expenses). The cards were issued as compensation, were probably subject to payroll taxes and both the cost and the taxes were deducted from revenue to get taxable income. Fraud losses are also deducted from revenue to get income. Charitable giving is usually deductible at the same point.

      That is different from deducting the total losses directly from the taxes which you actually pay which applies generally only to taxes paid elsewhere.

      • Yomiko says:

        Basically, if the company gave it to them (like the boss bought them then got reimbured) they are taxable income to the employees. If the boss gave them gifts as an individual out of his pocket and they were bonafide gifts, they are not taxable income. It sounds like it was the latter in this case.

  6. ahecht says:

    A lot of the gift cards I’ve seen in stores are designed so that the barcode that is scanned is on the card itself and visible through a cutout in the cardboard holder. That way someone can’t pull of the described scam without creating a forged gift card with a mismatched barcode and mag stripe. In fact, I’m pretty sure that I have Best Buy gift cards, still in the holders, that are designed like that.

    • sirwired says:

      I expect it would not be difficult to print a forged barcode on a gift card. Simply scrape the existing one off (or paint over it using a nice, neat, template. ) and then feed the card into a printer capable of direct-printing on CD’s. (Just cut a gift-card shaped hole in a CD to act as a carrier.)

      • Coleoptera Girl says:

        But what is the cost of this? It costs a lot less just to swap a gift card out of a holder for a used but legit card and you can keep swapping out as you empty the illegitimately obtained card. You can’t do that with your scheme. You have to keep putting money into your theft whereas with the swap-out, all you have to do is make an initial investment.
        That’s why I think having the barcode printed on the card itself is a good enough solution.

        • sirwired says:

          You don’t have to put a dime into the theft. You just walk out the door with unactivated gift cards. They aren’t anti-theft controlled at all, and are quite small and easy to steal.

          Just swapping out the cards with used ones isn’t good enough, as most (though not all) gift cards print the scanning barcode on the card directly (visible through a window in the holder); that’s why you’ll need to clone the barcode and mag stripe of a card you then put back on the shelf.

          Swapping out would only work if the barcode was on the holder, not the card. (Some places do it that way, and it’s stupid.)

          • Coleoptera Girl says:

            Good points! My example, then, only holds where the cards themselves aren’t scanned/swiped when the card’s purchased. Yours is more widely applicable…

    • Lyn Torden says:

      The thieves replace the card AND holder with one that does not have the window.

  7. Gravitational Eddy says:

    Because it’s far easier to blame something on someone else rather than step up and do the right thing.
    And the right thing would be to either refund the customer or reset the card that they have presented.
    Following up on that, perhaps the store (or corporate) should void the card that matches the “gift card holder” and thus the card will be voided. then reissue the customer with an exchange card that gets validated on the spot, -before- someone steals and switches the card.

    • StarKillerX says:

      With it being 2-3 months since they were bought I think it would be safe to assume the “stolen” cards were used long ago, so as to avoid them being canceled when they customer returned to complain.

  8. Bionic Data Drop says:

    I find it funny that a person who is complaining about a store that doesn’t stand behind what they sell is planning on a trip to Best Buy.

    Nudity offends me! I’m headed to the strip club.

  9. Jfielder says:

    This happened to my sister with a Logans steakhouse gift card purchased at CVS. She attempted to straighten it out by contacting CVS and they gave her the run around “we’ll call you back when we figure this out”… they did nothing.
    I then told her how to submit a chargeback claim with her CC company.

  10. longfeltwant says:

    Jeff is so generous he can’t be bothered to give cash? Sounds like a thoughtless jerk to me, just the same as everyone who gives gift cards.

    CASH, PEOPLE! CASH!

    • ovalseven says:

      Thoughtless? Giving cash requires less thought than giving a gift card.

      • longfeltwant says:

        No, it requires more thought. Anyone who thinks about it realizes that cash is better in every single way, and in no situation is a gift card better. Sure, getting a gift card requires more EFFORT, but who cares about that? I don’t want a gift that requires effort to get, I want a GOOD GIFT, and gift cards are always bad gifts — always. In 100% of cases, gift cards are strictly less useful than cash, with no exceptions. Only a thoughtless person would ever buy one.

        • belsonc says:

          Hmmm… I guess that means all the times I’ve gotten gift cards to places, and used them without any problem whatsoever, those were just figments of my imagination since they’re always bad always always always, and there’s no possibility that they can be used effectively.

          Shows what I know…

          • longfeltwant says:

            No, it simply shows that you aren’t following my point. Gift cards can be used, sure, but they can never be used better than cash. Sometimes they are equally good to cash, and often they are less useful than cash, but they are NEVER better than cash. My point is that the usefulness of gift cards is strictly less than the usefulness of cash — not that gift cards are useless.

            Or, are you saying that you went into stores which only accept gift cards, and do not accept cash? I’ve never heard of such a store (or restaurant) but perhaps there is such a place.

            • Jules Noctambule says:

              Some people feel that being given cash is akin to charity, and they don’t like that. A gift card says ‘Here, go enjoy yourself’ while cash says ‘You must not have enough money’.

            • belsonc says:

              No, I’m saying that so far, of the $50 gift card I got to Walmart when I bought my Xbox there on Black Friday, I’ve used 47+ dollars of it and based on a poor checkout experience that I had the last time I was there, I’ll likely let the other 2+ go to waste (because, given what happened, I’m going to derive some type of satisfaction from the fact that it’ll take them months to get back their 2 bucks). This, from your logic, is one of the situations/stores where the GC is as good as cash. However, no gift card is going to be better than cash; why should it be? That’s not the point of a gift card. A (store) gift card is a credit you can use at that store and that store alone, so even though you don’t have the flexibility of cash, it’s irrelevant – if you buy ALL your gas at Amoco, then why shouldn’t I get you an Amoco gift card, for example?

              I’m just having a hard time understanding what your seething, rabid hatred of gift cards is stemming from, I guess.

            • WalterSinister2 says:

              Coinstar gift cards are better than cash. If you get cash, they charge you 9%. Get a gift card for somewhere you shop anyway and you get the full dollar value.

              • bonafidebob says:

                Think about this a moment: SOMEONE is paying CoinStart to get you to take a gift card instead of cash, CoinStar’s not giving up on their profit just because you took a gift card.

                When you getting something for free you’re not the customer, you’re the product.

            • Selunesmom says:

              Amazon gift cards. “Because I know you like books that might not be available stateside yet, but I don’t know what you already have because you have so many books.”

        • RedOryx says:

          I must be that one weirdo then who likes giftcards as gifts. And my co-workers must be like me, because at our annual Christmas party, the gift cards are what get fought over the most (we do a Yankee Swap type thing)

    • The Porkchop Express says:

      Jeff didn’t have to give anything. A gift card for $100 is better than nothing any day. If you don’t wnat it, sell it to a friend that does or use it for the next gift you have to purchase for somebody.

    • Goldensummer says:

      If his company is buying them not him personally he might not have access to cash. The retail operation I manage allows me to use my discretion with rewarding my employees who go above and beyond but I must do it using a company credit card, so I purchase a gift card for them. Its the only time I use gift cards but its well worth it because it makes them happy and I like happy employees as much as I like happy customers.

  11. sirwired says:

    I don’t see how buying it from the actual store would make it fraud-proof. The gift card displays at an actual Best Buy, Home Depot, etc. are also scattered randomly all over the store.

    Pretty clever scam if you think about it… and devilishly hard to prevent. All the thief needs is a pile of unactivated gift cards and careful opening of the gift card package.

    Let this be a lesson… just give cash. Neither my wife or I bother with gift cards any more.

    • RueLaLaLa says:

      From what I’ve seen in department stores (Macy’s comes to mind) there is only the giftcard. The cards aren’t kept in a cardboard envelope with the same number/barcode on the envelope for scanning. So there is no way to steal a giftcard and still have the same number activated later. Once the giftcard leaves, that number isn’t on anything to be activated. So I guess it would be safer.

      • sirwired says:

        The cards are trivial to clone. You take the gift card home, duplicate it’s mag stripe and/or barcode onto another card, and put the original back on the shelf.

        Done.

        Fraud complete. Takes an inkjet printer, and an $80 or less mag stripe writer.

        • Kate says:

          So why put the original back? This makes no sense – why not just steal the card and be done with it?

          And I thought those cards had to be activated by the cashier – is this no longer true?

          • Coleoptera Girl says:

            That’s why you put the original back on the shelf, so that some unwitting person purchases the card and then when the card is activated, you go spend their money before they can.

  12. Tacojelly says:

    The entire concept of giftcards seems wrong to me; it’s uncouth to hand out cash as a gift, but a card that isolates and limits said cash is perfectly acceptable?

    Anyway, sucks for this guy. If I absolutely have to buy giftcards for people, I like amazon’s gift suggestion deal. I suggest a gift, so it’s not completely without thought, then if they don’t want it they just use the cash for something else.

  13. pinkbunnyslippers says:

    CASH IS KING, Jeff! Please remember this!

    On another note, maybe I’m just being blonde here but I thought gift cards couldn’t work unless they were activated by a cashier?

    • The Porkchop Express says:

      Some cards have the acitivation on the sleeve they come in, the card inside matches the barcode outside. In this case the scammers took the card inside and placed a used up or unactivated card inside. the card gets activated via the outside sleeve and they have a free gift card.

      Great idea really, but how do you know when it was activated?

      • pinkbunnyslippers says:

        Oh snap. I had no idea. I hardly buy gift cards and when I do, they’re the kind that have to be taken to the cash register to be activated. It sucks you have to actually worry about these shenanigans!

  14. Tim says:

    It sounds like the store was the victim of fraud, not the person who bought the cards. The store, therefore, should be the one to pursue the issue. And, by the way, as far as I see it, the store sold you a fake product, so the store has wronged you. It’d be like if the store sold you an empty TV box.

    Why is the activation code on the card holder, and not on the card itself? It seems like it’d be harder to pull the scam if the activation code were on the card.

  15. BlueHighlighterNextToACoozie says:

    Two days ago, one of my employees humbly pointed out that the Best Buy card for $100 (yeah, pretty generous huh!)

    and

    I insisted that he call them for me (figuring it would be a frustrating call). I was right.

    Yup glad I dont work for him.

    • The Porkchop Express says:

      He insisted that the manager at Ralph’s call the company, not his employee.

      “Two days ago, one of my employees humbly pointed out that the Best Buy card for $100 (yeah, pretty generous huh!) did not work at Best Buy. Frustrated, I went to Ralph’s tonight to sort it out.

      The manager suggested I call their 800 number to sort it out. I insisted that he call them for me (figuring it would be a frustrating call). I was right.”

      That part where he went to Ralph’s is what you left out.

  16. cosmotic says:

    Funny the poster bought gift cards to a store he feels is torture. Nice gift!

  17. craftman says:

    One of the branches of the company I work for packages gift cards in the tamper-proof packaging. I blame the cashier who activated the cards in the first place (perhaps even the OP), since it should be very easy to see the tampering – depending on the packaging design.

    Any exacto knife work should be visible. The adhesive won’t “melt” without mangling the cardboard. I would really like to see the packaging, considering our company stakes its reputation on it.

  18. Robert Nagel says:

    How would the store know whether or not the OP had used the cards and claimed they were bogus? They need time to check this out. Their procedures allowing this scenario put them at risk so the benefit of the doubt is going to go against them unless they can find convincing proof that the OP wasn’t trying to pull a fast one.

  19. jp says:

    I can see why Ralphs is hesitant and needs to investigate. Think about it. I go to Ralphs. Pick up 2 identical gift cards. Put one in my pocket and the other to the register for activation. Go use that card and zero it out. Take the pocketed, non-activated card, put it in the original activated cardboard packaging, along with receipt from the original activated card back to Ralphs and say the card never worked. Ralphs sees that the two bar-codes don’t match and say “someone” committed fraud by switching out the cards.

  20. quail says:

    This is an odd one. Don’t most of those gift cards have a square cut out so that the card itself gets scanned and not some bar code on the package? That’s the way I remember them being. Scan the package to make the sale then scan the card through the cut-out to activate it.

  21. anime_runs_my_life says:

    “What I’ve learned is to never buy gift cards from a supermarket or big box store, but rather only from the actual store that I (or whoever will get the card) am going to use the gift card at.”

    Uh hate to burst your bubble, but it does happen in those stores too. BTW, all you need to do is google gift card scams and you’ll see that it happens – a lot.

    Here, let me google that for you – http://bit.ly/wy4zjt

  22. webweazel says:

    Things like this happen quite frequently. I remember the advice of years back-

    If you’re going to buy someone a gift card, do NOT buy one from the floor. Only buy one from someone at customer service (specifically) who brings a fresh card from behind the counter.

    Now, this advice was from before stores carried gift cards for other stores. I don’t know if stores carry fresh cards for those other stores behind the counter also or JUST on the floor displays. Couldn’t hurt to ask. If not, go to the stores directly to buy the cards from behind the CS counter. Better safe than sorry.

    No matter what, the best advice to take from all this is- don’t buy gift cards located on displays on the floors. Ever.

  23. Wolfbird says:

    If you are going to give me $X anyway, please give me real $X that I can spend anywhere I want instead of stores you think I like. One of my old employers paid part of my real salary in Amex gift cards, except that only Walmart and that smelly pet store accepts that type up here.

  24. bigd738778 says:

    Wow. I normally don’t completly agree with an OP but he really should be refunded the full amount on the spot.

  25. MikeVx says:

    One way to cut down on these gift card tricks would be two hopefully-simple software changes in the back-end systems. One: A card number checked for balance without being activated is instantly voided, and cannot be activated, a notice pops up telling the cashier to trash the card and give the purchasing customer a new one, repeat until the warning does not pop up. Customer will appreciate being protected from fraud. Two: If a card is being re-charged, pop up a warning to the cashier to verify that this is a re-charge and not a new purchase, if it is a new purchase, see point one.

    It would not eliminate fraud, but it would complicate the lives of fraudsters. Eliminating all other packaging forms and returning to the fold-card carriers that allowed/required the mag stripe to be scanned would help also.

  26. thewatchdog says:

    The entire system of gift-cards is a game of the musical chairs blame game. When I worked for retail tech support and if we ever had a store with cards not activating there was basically nothing we could do. There were rumors of an epic conference call that happened long ago with support reps from our company, the card company, the third party processor, the network people and the satellite comms people and it turned into a half-hour shouting match where everyone blamed everyone else until they passed out from exhaustion.

    Moral of the story – If your gift card activates and actually has a balance then thank the gods and spend it pronto. If it doesn’t then you just bought a very expensive plastic postcard and better luck next time. And NEVER buy GreenDot cards they are the dumbest invention ever.

  27. ancientone567 says:

    I will never buy gift cards after 2 Christmases ago. I bought a 100- card for my sister from Target and she lost the card. I went back to target and told them to look up the card as I bought it a few days ago. They conveniently said that they could not find it in the system. I knew they were pulling a scam on me. Once they know a card is missing they can look it up and make a gift card for themselves with the number if they can convince the customer it is a lost cause. This is a common scam done by employees of Target and other chains. I called for a manger this time who also seemed to be part of the scam as I got the same response. Hell she probably was teaching it to everyone. I was calling the police when a different young gentleman from the store said hold a sec let me try. In less than a minute he had my number and gave me the card. I then went back and shamed the manger and her partner in crime. Bottom line, DON’T BUY THOSE CARDS.

  28. dush says:

    Or don’t buy Best Buy gift cards at all?

  29. NumberSix says:

    Here’s one to watch out for:

    Thief takes two cards, scans and prints the bar code of one and sticks it to the back of the other. Places modified card back on the rack and waits for someone to activate it with the bar code of the one they have in their possession.

    My wife got hit with that one once.