Attention shoppers: Avoid this gift card scam

Although it doesn't happen often, some consumers are the victims of gift card scams where they are defrauded of the value stored on the gift cards they buy. Taking a few simple precautions can protect you from most of these scams.

One of the most reported scams -- outlined in a widely circulated email -- works like this: The scam artist, using a magnetic strip scanner, scans the numbers on the gift cards displayed for sale. A few days later, he calls the customer service number posted on the back of the gift card, to see if the card has been activated. Gift card activation happens when it is purchased and value is stored on it. When the thief learns that a gift has been activated, he uses it to make purchases online, where physical presentation of the gift card is not required. The unsuspecting consumer who later tries to use the gift card finds that the value of the card has been depleted.

Here what you can do to protect yourself from most of these gift card scams:

Buy only gift cards that have a PIN associated with them and inspect the card for signs of tampering before you buy. If the gift card has been removed from its protective case or the PIN on the back of the gift card has been exposed, do NOT buy it. Report the finding to a store manager immediately.

Ask the clerk immediately to scan the gift card at the register after buying it to validate that the card bears the proper value. This protects you from the sleight-of-hand trick where the gift card you bought is quickly swapped for a used gift card, which will have no value.

Keep your gift card receipt as proof of purchase as long as you have stored value on the card. Also register your gift card on the issuer's web site. Doing this gives you the ability to frequently check the card's balance and activity online so that you can detect improper use faster than you otherwise would.

Buy Sell or Trade Gift Cards

Say you have a gift card that you want to swap for another gift card, or sell it for cash, and you can't find a friend who is willing to help you do this as a private transaction. What you can do is turn to an online marketplace for unwanted gift cards. Check out web sites that allow people to buy, sell or trade pre-owned gift cards such as PlasticJungle and Swapagift. Of course, these eBay-like sites charge a fee for completed transactions. For some folks, selling an unwanted gift card for needed cash is better that using it to buy something they really don't need, or not using it at all.

  • Ray Martin

    View all articles by Ray Martin on CBS MoneyWatch»
    Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.