New Credit Card Rules May Make It Difficult To Purchase Gift Cards

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New Credit Card Rules May Make It Difficult To Purchase Gift Cards

Image courtesy of arvind grover

If you recently tried to purchase a gift card and were told you had to use cash or had to stick to a smaller denomination, you’re not alone. The way in which retailers sell gift cards has changed in the five months since new credit card rules went into effect.

Under the rules, which took effect in October, retailers are now liable for fraudulent purchases if they haven’t upgraded their checkout technology to accept more secure, but far from perfect, chip-enabled cards.

In response, some retailers who have yet to implement the more secure technology have made an effort to rein in fraudsters who purchase gift cards using stolen credit card information by restricting gift card purchases, the Wall Street Journal reports.

According to executives with the National Grocers Association, fraudulent gift card purchases have contributed to the $3.89 billion in counterfeit payment-card losses that were incurred by issuers in 2014.

Those losses have spurred some retailers to rethink their gift-card purchase policies. In some cases, retailers have implemented restrictions on gift cards: limiting purchases to certain denominations, requiring customers use cash, and  limiting repeat purchases.

For example, Kroger, which is in the midst of implementing the new checkout technology, has limited the number of gift-card purchases that are made on a credit card within a 24-hour period, Chris Hjelm, the chain’s chief information officer, tells the WSJ.

“We have done some different things for nonchip transactions to make sure we are mitigating the risk,” he said.

Another grocer, Safeway, has reportedly begun pulling open-loop gift cards — those backed by credit card companies like Visa and MasterCard that can be used anywhere.

While Safeway declined to comment on gift card restrictions, customers say they’ve seen associates remove the open-loop cards from register racks, and been told by employees that cards can only be purchased with cash.

Blackhawk Network Holdings Inc., a company that distributes gift cards, tells the WSJ that retailers’ changing policies have contributed to a decline in revenue for the company.

“Some of our retail distribution partners who are not compliant have taken measures to limit exposure to those credit-card losses in their stores,” Chief Executive Talbott Roche told analysts recently when the company reported quarterly earnings. She cited efforts to limit or control the sale of higher-denomination open-loop cards.

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Gift Cards Feel Pinch of New Rules [The Wall Street Journal]