Gift Card Fraud talk is mostly bogus, says EWeek

This week’s stories about gift card fraud struck me with chagrin, especially given my recommendations to small businesses that they do this internally (but using REAL cards), rather than run these charges through credit card vendors as most large vendors are forced to do.

The most common story going around lately involves people reading numbers off of cards in stores and then checking later to see if the card has been activated, then using the number online and emptying the card before the recipient gets to use it.

EWeek reports that security measures on these cards have improved in the last few years and most of the recent rumors are just urban myths because of these changes. Read the article, then we’ll move on.,1895,2069623,00.asp

When I say that I recommend that small businesses do this themselves, I mean avoid the use of the credit card networks to process your gift cards.


Because you dont need to spend the money for the services they offer that you dont need, nor give up a cut of your purchases if you only have one location. No credit card network is necessary under these circumstances. Well-written point of sale programs include support for internal gift card processing. If yours doesnt, ask your vendor why they dont and look around for one that does.

If you have multiple locations, we can still set you up to avoid the credit card networks, though it is a little more complex.

If your online store doesnt allow for the use of gift cards, this entire thing is a non-issue, because you simply have to require the card to be present when someone uses it in your store OR you have to require ID. Remember, you’re not doing this to hassle your customer, you’re doing this to protect your customer’s gift value.

Want some help figuring this out? Feel free to contact me. Its not that complex, but more importantly its a big boon to sales, it gets you NEW customers and its “sticky” (meaning, it brings customers back).

Dont let the scaremongers chase you away. There’s no reason why you cant compete with the big boys on this – and do so with far more safety than they can.

Don’t believe me? Think about the scare tactics used by the big credit card merchants. Gartner released 2 really interesting reports this week about credit cards and e-commerce. One said that paranoia about online sales will result in 2 billion (with a B) in lost sales yet it also says that brick and mortar stores are LESS secure than websites. A “brick and mortar store” means regular retail and service businesses on the streets of your town).

That info doesnt jive reality-wise, but it DOES jive with the info you see in advertising by the major card vendors. They are hammering on tv that you must use their cards to be protected – as if thats the only way to be protected. Its there to make sure you only use the major cards. An article discussing the 2 recent Gartner reports and the efforts of the major card companies is also in EWeek.