Gift Card Scammers Target PIN Numbers

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DALLAS (CBSMiami) - Scams involving gift cards continue to be a growing problem, something Ginger Allen found out first hand.

"I sent my dad a gift card to Outback Steakhouse for Father's Day," she said, "But when he tried to use it at a restaurant in California, the manager said the card had a zero balance"

Allen said she decided to see what happened.

"We tracked the package and the card activity and learned that while the gift card was being shipped to my dad someone else was already using it at an Outback in Dallas to buy drinks and appetizers," she said.

According to the manager of the Outback in Dallas, a customer had the card number and pin which they had to manually key in. He said it's a common practice when a customer does not have the card in hand.

So how did they get the card and PIN number?

"Some of them will just do it really old school way. They'll go into the establishment, pen and paper, and start writing down numbers," said Hasan Aijaz, an attorney with the Federal Trade Commission. "In other instances, they figure it out using algorithms and lastly they'll skim it using something similar to a credit card skimmer."

Aijaz said this is called gift card draining. He said if you look at gift cards sold in stores, some may hide their numbers and PINs but others are easy to see. Some have a silver zebra-like sticker covering the PIN. However, those stickers are easily purchased online for pennies.

The FTC said the thieves simply remove the old sticker, record the number, and replace it with a new one.

So how do they know when cash had been added to the cards?

"Some of them, depending on the level of sophistication, will go online and do it by hand, cumbersome. Others have realized this is taking too much time and they've developed custom written software," said Aijaz. "That software will then return the result to hacker and say 'here are the numbers that have been activated and here's the money that you can now use'."

Outback said they changed their gift cards last year to cover the PIN number. However, older cards may still be found on shelves.

The Retail Gift Card Association says it now recommends retailers use packaging which "covers and protects magnetic strips and gift card PINs.