Tougher To Buy Gift Cards? Blame Those New Chip Credit Cards

It has been getting harder and hardet his year to liquidate gift cards, but it’s also getting harder to buy gift cards at many merchants. The main reason for the latter is those new credit and debit cards we received, with that shiny chip that is supposed to keep us safe.

More merchants are requiring that customers buy the cards with cash or asking that they show identification. Others have cut back to smaller denominations, put limits on repeat purchases or stopped selling certain cards altogether. One Staples location nearby, got rid of the gift card rack altogether.

A selection of gift cards in a store in New York on Wednesday, November 2, 2011. (© Richard B. Levine)

Americans are expected to load $651 billion on prepaid cards this year, up 57% from six years ago, according to consulting firm Mercator Advisory Group. Nearly half of that is expected to in the form of Visa, MasterCard or Amex gift cards.

The problem is that gift cards also are a favorite among criminals, who pay for them with stolen credit-cards. A way to quickly extract cash from those credit cards, before they’re reported stolen and shut down and a reason you might get suspicious looks when buying large amounts of gift cards.

The cost for this type of fraud was absorbed by the financial institutions that issued the credit cards. $3.89 billion in counterfeit payment-card losses that were incurred by issuers in 2014.

That all changed in October. New rules went into effect making merchants liable for fraud-related losses if they haven’t upgraded their checkout technology to accept credit cards that are embedded with computer chips. This was a way to force merchants to switch, but many have yet to do so. In general, grocery stores, small businesses and gas stations have been slower to implement the new chip-based card technology, making them more vulnerable to fraud, payments specialists said.

Kroger is in the midst of upgrading its checkout equipment to accept chip cards and expects to complete the overhaul by the end of the month. To ward off thieves, the grocer is limiting the number of gift-card purchases that are made on a credit card within a 24-hour period, said Chris Hjelm, the chain’s chief information officer. “We have done some different things for nonchip transactions to make sure we are mitigating the risk,” he said. Mr. Hjelm declined to discuss further details, saying “the bad guys would love to know.”

Have you noticed any changes at your favorite merchants? Chime in!

WSJ Report

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