by Alex Palmer | October 23, 2018
While the popularity of gift cards continues to grow among consumers and incentive program participants, they unfortunately are also being embraced by scammers. That was the takeaway from a new report from the Federal Trade Commission, which found that gift cards were used in 26 percent of frauds in which the type of payment was reported -- a 270 percent increase from just three years ago.

"Con artists favor these cards because they can get quick cash, the transaction is largely irreversible, and they can remain anonymous," wrote Emma Fletcher, presidential management fellow at the FTC and author of the report. 

She stated that people are telling the FTC that they're increasingly being told to pay with gift cards -- by giving someone the PIN number off the back of a gift card or by specially requesting cards according to their brand. For those requesting specific brands, iTunes was the most popular choice, mentioned in 23.7 percent of cases, followed by Google Play (18.3 percent), MoneyPak (3.5 percent), Amazon (2.5 percent) and Steam (2.3 percent). According to the FTC, iTunes has been a top choice for such scams since 2016.

These findings underline the growing importance of security when it comes to using gift cards in both corporate and consumer incentive programs and the importance of working with incentive suppliers and/or merchants with strong fraud protections.

Looking at all fraud reports available to the FTC from all sources, the FTC found that losses where people reported using gift or reload cards reached $40 million in 2017, up from $20 million in 2015 and $27 million in 2016. Through September of this year, that number is already $53 million. 

"And while individual fraud losses using these cards have held steady at a $500 median loss per incident, people report losing a lot more to some types of scams," wrote Fletcher. "Tech support scams are a notable example. When people report paying for fraudulent tech support services with a gift or reload card, the median dollar loss is now $959, up nearly 60 percent from $600 in 2017."

The report states that gift cards and reload cards are now the top reported method of payment for imposter scams in which fraudsters pose as well-known businesses, family members, friends or government agencies such as the IRS.