Gift cards make popular gifts, targets for scammers

Gift cards are popular gifts this time of year, but they're also big targets for theft.

Americans have spent almost $30 billion on gift cards this holiday season, but have also lost more than $50 million so far this year in gift card-related scams, according to the Federal Trade Commission.

Tech experts at Chicago's Trustwave said the latest technology allows bots to randomly generate numbers and match them with gift cards you have activated with the PIN.

"The algorithm is going to be pretty hard to generate. It's going to be a lot of numbers, but they can still do that right. They can still do that till they generate a hit," said Trustwave security expert Jeremy Batterman.

William Caput, an ethical hacker, explained that the lower-tech version of that is for criminals to take the unloaded gift cards from the rack and swipe them on a "writer" device. The device will store the number that the thieves are after, which is on the card and the magnetic strip. The thieves will put the card back on the shelf and check back later to see if someone purchased the card and put money on it.

Once the card has been sold, Caput said the scammer can then transfer the gift card data from the device to a cloned, dummy card for their own use.

"You can now go to whatever vendor it was and use the card just like cash," he said.

Some cards require consumers to scratch away to see the PIN number, but Caput said that's not much protection.

"You can put a new label over it and it looks identical to the one that was on there," he said.

Crooks can also buy gift cards with "dirty" money and resell them online, Batterman said.

"What they are trying to do is push that sale at a discount to launder that money so now that money coming from a consumer is legitimate," he said.

Cards bought on third-party websites may not always have the advertised value on them. Experts recommend purchasing gift cards directly from a vendor.

The Retail Gift Card Association says you should always buy from trusted sources and check the back of cards to see if numbers have been tampered with. The RGCA also says gift cards are "actually pretty safe" because of tactics retailers are using to cover protected card data and PINs. Cashiers are trained to inspect for tampered packaging as well.

The industry group also says it's beefing up technology to fight suspicious activity and strengthening algorithms to prevent replication.

Jason Knowles: "Would you buy a gift card?"

Jeremy Batterman: "I would, yes, but I would follow those rules of acquiring it from a known retailer, I would caution the ones that sell them for a discount unless it is a known site."

The gift card association also says there are reputable third-party gift card exchange sites.

No matter where you buy a gift card, the No. 1 rule is to use them quickly, before they can be compromised.

Even with a receipt experts say there is not much you can do if you discover you have a zero balance.

From RGCA on gift card trade sites:

" Additionally, I wanted to note that both www.cardcash.com and www.cardpool.com are very reputable gift card exchange companies that consumers use to exchange their gift cards."