Pre-Paid Gift Card Fraud


Most of our stores carry different types of pre-paid load cards, re-chargeable phone cards, and gift cards. From our phone card business we receive a decent gross profit and repeat customers, while with gift cards we only get a set fee with a heavy risk attached if a transaction turns into a fraudulent load.

Many stores are getting phone calls from con artists all over the country to load gift cards, Visa cards, Green Dot cards, or other kinds of cards over the phone for up to $500, resulting in huge losses to franchisees. These callers know our system very well and pretend they work for 7-Eleven, Inc. Unfortunately, they end up successfully convincing the sales associate to load these prepaid cards over the phone by telling them the cards will expire and they need to test if the cards really work, or some other excuse.

In most cases, this money is transferred to another account within minutes of these fraudulent transactions. Stores that report this loss to law enforcement end up nowhere because the police are unable to locate these calls and trace the money. In-Comm representatives are also unable to help stores, as they have no answer to this loss. SEI’s Asset Protection department and field staff have no explanation, except for a repeated answer to train store employees not to load these cards over the phone. Yes, the best and only solution so far is to train store employees not to load these cards over the phone and to let them know that SEI’s employees do not call stores during the night.

This issue has been raised with SEI in National Coalition Board meetings, and as a result from mid-December onwards a warning will appear on our cash registers not to load any pre-paid cards over the phone or if the customer is not in the store. This is a small step in the right direction, but a lot more needs to be done. We sell a lot of cards that have a load range of $15 to $500 like Green Dot, Vanilla Reload Network, Net Spend, Vanilla Visa and even cards like Kindle Fire, Karma Koin, and a few others. These high-ranging load amounts do not make any sense at all. We are not Best Buy, Wal-Mart or other big box chains, where customers buy big-ticket items. If the category manager for these cards conducts a fair analysis and removes all the fraudulent loads and transactions, they will probably find only one or two genuine $500 loads.

The same type of fraud occurred in our stores—especially in the Las Vegas area—approximately six years ago when 7-Eleven gift cards had a $500 max limit. Con artists visited our stores to get five or ten of these cards and loaded them using skimmed credit cards. Within hours these con artists would go to other 7-Eleven stores to buy cigarette cartons with the fraudulently loaded gift cards, resulting in losses to both stores. The issue was raised at that time also, and SEI updated their technology and lowered the high limit on gift cards to $100.

It is time again to think seriously about this scam. I recommend that SEI not promote any pre-paid load card of more than $100, and that all these gift cards or pre-paid cards not be loaded with credit cards in order to reduce the loss to franchisees. Some other convenience sores have programmed their registers to ask for a supervisor’s ID to complete the transaction if it is more than $50 for gift cards. This sounds like another good step to reduce the fraud.

No doubt franchisees need to train their employees not to load these cards over the phone, but storeowners should also take other precautions to prevent this type of loss. These pre-paid or gift cards are not required items, so it is entirely up to franchisees whether to carry them or not. Yes, it might make sense to carry $25 gift cards, but not $500 gift cards. This is only a suggestion, but you could tell the gift card reps not to leave cards with high amounts in your mix. Also, if you already have the high-limit cards in your stores, you might want to remove them and put them in your office to be handled by your well-trained employees and not by the night cashiers, as most of these phone calls hit the stores during the late hours. In the meantime, train all your sales associates not to accept credit cards for high amount gift cards just to save you from back charges until the system is fixed.

All of these suggestions are only to minimize our loss. Ultimately, the decision is yours to protect your income.