5 prepaid debit card scams to avoid

As much as prepaid debit cards helps in keeping debt under control, they can make you an unwitting victim of fraud. Since most of these cards are not linked to a bank account and the funds are not insured, criminals continue to find new ways to scam people out of their money. Due to this, it is unfortunate that one may not have legal protection or recourse to get their money back. Here are five of the most common scams used by criminals targeting the users of prepaid debit cards.

Flash attacks

Fraudsters who commit the so-called flash attacks target prepaid debit cards and traditional debit cards. This is because those cards do not entail the same level of fraud detection that credit cards do, says Robert Siciliano, CEO of IDTheftSecurity.com.  Since fraud detection systems are unable to flag nearly simultaneous transactions from the same account, fraudsters make several cloned copies of the victim’s card and use them within 5 to 10 minutes on different ATMs simultaneously. When a sales person or a waiter runs your card through a compromised card reader, the information on the card’s magnetic strip is copied. This information together with the card number is then used to make the cloned cards. One should always cover their PIN when using an ATM, gas pump or point-of-sale terminal. They should check their balance online or through customer service on a daily basis if they use a debit card regularly.

Deceptive marketing scam

Fraudulent payday loan companies trick online loan application into using their online applications to purchase prepaid debit cards. Warns Doug Johnson, vice president of risk management policy at the American Bankers Association in Washington, D.C,. An example is in late 2011 where the Federal Trade Commission returned nearly $2 million to consumers who were tricked into buying prepaid debit cards when they filled out payday loan applications online by Swish Marketing Inc.. Applicants were unknowingly charged up to $54.95 per application in that scheme for unrelated prepaid debit cards with zero balances. In order to avoid this, one should always get an explanation of fee charged and also void applying for loans online.  

Cell phone camera scam

A 30-second video of victim is taken by a skimmer standing behind them while using a prepaid debit card in a grocery store or at another checkout counter. The skimmer does this with a cell phone camera. Jim Angleton, president of Aegis, a corporate prepaid debit card issuer says the skimmer then goes frame by frame to get the PIN and card information which they use to create a cloned card. They will then drain funds on the victim’s card making purchases with the cloned card. One should always be aware of their surroundings and cover the keyboard while entering their PIN. If one thinks they have been filmed, they should call their card company and report a suspicious activity. The card will be monitored for free.

Utility fraud

This scam targets people who are behind on their utility bills. A caller claiming to represent a person’s utility company will ask them to make payment by purchasing a Green Dot Visa card. They will tell the person that their services are about to be shut off and give them another phone number where information from the prepaid debit card is obtained and monetary value from the green Dot Visa card is removed. It is advisable to always purchase a prepaid debit card from a reputable and known business such as your local bank. It is better if it is in conjunction with your employer. Then again, most utility companies do not proactively contact customers who are overdue on their bills let alone asking for card information over the phone.

Nigerian 419 scam

This scam, named for the section of Nigerian legal code that deals with fraud, is widely known as the “419 scam”.  A Nigerian fraudster sends an email to the victim where they promise to share a large sum of money with their target if they wire a certain amount of money to cover the expenses. These fraudulent emails may originate in other countries other than Nigeria and frequently ask for prepaid debit cards rather than wire transfers today. The skimmer will request for the prepaid card number and go ahead to withdraw all the funds form the card. To avoid this, never share your prepaid debit card details with an unknown person who has sent you a mail promising to give you a large sum of money. Delete the email at once.