October 18, 2007

Top Five Gift Card Scams on eBay

To help people identify gift card scams, we’ve compiled a list of the top five gift card scams on eBay. The scams are listed in order of complexity, specifically from how easy to how difficult it is to spot the scam. In reality, some of these gift card scams occur outside of eBay, so be cognizant of it when buying gift cards from the secondary market.
Top 5 Gift Card Scams on eBay

1. Mystery Auction: By far the easiest scam to spot on eBay because more times than not the auction is advertised as a “mystery auction”. A typical mystery auction centers around a gift card of unknown value. The seller usually states that the value is “up to” a specific dollar amount or is worth from x to y dollars “guaranteed”. In layman’s term, the gift card’s value is guaranteed to be less than the specified dollar amount. Once the auction ends, the seller sends the winner a gift card with a value that is less than auction’s winning bid amount. Essentially, the auction winner is buying a gift card for more than the face value. The only mystery here is why so many people keep falling for it. If you see a mystery auction for a gift card, just ignore it and save yourself the trouble.

2. Lost in the Mail: Seller claims to have mailed the gift card to you. Days go by and still no gift card. You continue to follow up with the seller and the seller either continues to give more excuses or goes completely radio silent. “Lost in the mail” refers to any scams related to non-delivery of purchased gift cards. eBay recommends that you handle the dispute with the seller first using their dispute resolution process. However, you’ll have to wait at least twenty days before eBay will instigate any action against the seller. However, if you paid with PayPal and followed their buyer protection guideline, it is possible to recover your money. Using a credit card to make the purchase will also entitle you additional buyer protection. The best way to avoid “lost in the mail” scams is to only bid and purchase gift cards from people with multiple feedbacks and a solid rating, such as 50+ feedbacks with a rating of 95+%. Also be sure to check that the seller is not selling multiple gift cards as eBay prohibits sellers from listing multiple gift cards in a one week period.

3. Bait and Switch: Instead of mailing nothing to the winner, the scammer sends a gift card with little or no value left, for a completely different merchant, or something completely else, such as a piece of plastic. The gift card is usually mailed with signature delivery confirmation, so the scammer can prove that they mailed something to the winner. Even if the winner goes through the long arduous process to recoup their lost, the scammer can rely on seller protection or insurance as another means to pull off the scam. So instead of you being the victim, the payment company can end up being victim. There is not much you can do to avoid this scam until you find yourself ensnared in it. However, you can protect yourself and recover your money if you follow PayPal’s buyer protection guidelines. Furthermore, by paying with a credit card you are also entitled to additional protection. The recovery process is burdensome, but at least you can recoup your money.

4. The Backdoor: The auction listing looks good, feedback rating of user is solid, and the gift card arrives hassle free as expected. You leave a glowing feedback. However, a few days later, the gift card becomes invalid or has a zero balance. What happened? The seller probably used a back door technique to make online purchases with your gift card or reported the gift card stolen and had the gift card reissued. To minimize the chance of this scam happening to you, check to make sure that the gift card’s PIN is not exposed. Do not ask the seller to scratch off the PIN’s seal or you’ll be leaving yourself vulnerable, unless you intend to make online purchases and do not need the physical card. Lastly, once you receive the gift card, check to make sure it is not registered. Regardless if it is registered or not, have it registered to yourself immediately. Do this before you leave a feedback on eBay.

5. Hot Potato: Hot Potato refers to gift cards that are “hot”, because it was purchased with stolen credit cards or goods. The scammer needs to dispose of the cards quickly before the stolen credit card is reported and the issuing merchant disables the gift cards. Unfortunately, if you end up buying one of these “hot gift cards”, you’ll be left holding the bag and become an unsuspecting victim in helping identity theft rings launder money. Usually upfront indicators, such as price, confirmation of value, and delivery, will not set off any red flags and may lead many to think that everything is legit until the gift card no longer works. This is one of the hardest scam to spot unless the seller is desperate to sell their “hot gift cards” at a very low price. A good practice is to quickly use up the gift card and not let it sit around.

While there is no fool proof way to protect yourself from getting scammed, if you remember to keep an eye out for these potential gift card scams you’ll minimize the chances of it happening to you. Remember to buy gift cards from trusted sellers (those with multiple and high feedback ratings. Carefully, inspect the gift card once you have received it, register it to yourself if possible, and quickly use it. Lastly, inform yourself of eBay’s policies on listing gift cards as it is designed to mitigate your chance of getting scammed and be wary of any seller violating those policies.

eBay’s Policies on Listing Gift Cards [AllThingsGiftCard]

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