Prepaid Card Scams: What To Watch For & How to Protect Yourself

When it comes to prepaid cards, fraud makes up a very small percentage of customer complaints—especially when compared to traditional banking methods–but it still exists. In 2015, prepaid cards accounted for 4 percent of all fraud losses in the United States. While that’s a far cry from the amount of credit card fraud (71 percent), it still amounted to approximately $500 million of fraud. With prepaid cards becoming more popular, there have been more and more instances of fraud. You need to familiarize yourself with popular prepaid card scams and take steps to protect yourself.

Scam #1: Telephone Scam

You’ve probably heard of someone who has been exposed to this particular scam. Scammers will call a victim and present them with a fake scenario. Using information such as the name of a relative, bank details, or address/personal info, fraudsters will impersonate law enforcement officials or lawyers and tell the victim that a relative of theirs is in trouble, and that they will need to send money to keep them out of prison or avoid charges. Another fraud scenario that is popular now is to have the fraudster impersonate a member of the government or the Canada Revenue Agency and tell the victim they owe money for taxes, and if they don’t pay immediately they will face criminal charges.

The fraudsters then get their victims to pay via prepaid cards. The criminals instruct the victims to provide the numbered codes on the cards, giving them access to the funds. Once fraudsters have access to the funds, they can transfer the money to another card, making it very difficult to track the money. Millions of dollars a year is lost as a result of this kind of scam, and there is little recourse for the victim once the money is gone.

How Can You Protect Yourself?
The CRA and other government agencies will never call you on the phone and request information or payment—everything is done via mail. Only provide card information when you yourself have initiated the call. Likewise, no law enforcement agency will call you and ask you to send them money via a prepaid card. If you feel suspicious about a number, hang up the phone and look up the direct number on the internet.

For more information about avoiding this kind of fraud, click here.

Scam #2: Cellphone Camera Scam

These days, everyone has a smart phone with a camera on it, and this has opened up new avenues for fraud. Next time you take out a card to use it, be careful that you aren’t being videotaped. It sounds silly, but scammers have been known to stand behind victims while they are making a purchase and videotape the transactions. They will then go over a recording frame by frame to get your card information and PIN, and then create a duplicate card. The fraudster will then use your card number and PIN to make transactions/withdraw money.

How Can You Protect Yourself?
Make sure to protect your card at all times. Be aware of your surroundings and pay attention to suspicious interactions, such as a person crowding behind you with their phone out. If you feel that your cards security may have been breached, reach out to your card company, who will monitor any suspicious activity.

Scam 3: Computer Hacks

Hackers may hijack your computer and install a virus/present a pop-up on your screen that declares that there is something wrong with your computer, or that you have violated federal law. This may occur when visiting an unreliable site or downloading a suspicious file. The fraudsters will then demand that the victim use a prepaid card to pay for “anti-virus software” or a fine in order to unlock/fix their computer.

How Can Your Protect Yourself?
Keep your anti-virus software up-to-date, avoid going to suspicious/untrustworthy sites, and know that the government will never send a message to your computer asking you to pay for something.

Scam #4: Card Swaps / Card Skimming

A fraudster enters a store and steals a pack of prepaid cards that are hanging on a rack. The perp then covertly opens the package and replaces a real card with a fake card. They then return the package to the original location and wait for an unsuspecting customer to activate the fake card. Once it is activated, the fraudster takes the funds from the card.

Alternatively, the fraudster can copy (skim) the magnetic swipe data from one card to another and then wait for the copied card to be activated. Once a customer activates the card, the fraudster will have an exact copy and can use the funds.

How Can You Protect Yourself?
Create a tamper-proof package and train staff to watch for this type of in-store fraud. It’s also important to display cards in an organized and easy-to-see location.

Other Tips For Avoiding Fraud:

– Shred/cut up old cards that you are no longer using
– Frequently change your password to online financial accounts
– Never give away important personal/financial information to incoming emails/calls
– Treat your cards like cash! Never leave your card out in the open.
– If you suspect something is wrong contact your financial provider immediately.
– Check your account history periodically.
– Don’t use untrustworthy sites for online shopping

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