Beware of gift cards for the holidays

We're down to the last minute for holiday shopping and you might be tempted to reach for one of those gift cards on the rack by the checkout counter to round out your list. Beware.

McLaughlin on Your Side hears all the complaints. Alsysia Stansfield reached out to us several years ago after discovering the prepaid gift card she has purchased at the Walmart Super Centre in Surrey had been compromised.

Tampered cards

Those prepaid cards are no good until purchased and activated at checkout. So what went wrong?

Thieves had stolen the card off the rack and carefully slit open the package, replacing the $150 prepaid Visa card with a useless dummy card. They copy the codes and any needed PIN information then return to the store and slip them back on the rack, hoping unsuspecting consumers don't notice. Stansfield didn't.

“I think someone’s holding the cards at home waiting for them to be activated and going and spending the money,” she said.

“Scammers copy the gift card codes and then they scratch off the strip on the back of the card to steal the PIN. And then once you load money into the card, they can steal from you," explained Tobie Stanger, Consumer Reports money editor.

After she got scammed, Stansfield says she went back to the store and found five more tampered cards on the rack waiting to be purchased.

CTV News helped sort it out. She got her money back and Walmart cracked down pulling all the cards off the rack.

Make sure to examine your gift card carefully before you purchase it. Look for any evidence of cut seams, glue or residue and inspect the barcode.

E-gift cards

You also want to be very careful when sending e-gift cards. Make sure you are sending it to the right person and have the correct information entered, such as their email, phone number or social media account.

Since you’ll be revealing personal information about yourself and the recipient, including credit card numbers, buy e-gift cards only from trusted merchants.

Maintenance fees

Watch out for prepaid gift cards that have maintenance fees. Federally regulated banks in Canada are barred from charging any maintenance fees for the first 12 months on prepaid credit cards. And reloadable credit cards need your permission to charge a fee.

Those rules don't apply to credit unions.

Several years ago, Jessica Liew contacted McLaughlin on Your Side complaining about a prepaid $500 credit union issued card that she had received as a gift and had tucked away and forgotten.

After three years, the monthly fees had eaten up about $200.

“Even though I hadn’t activated it, the money was still being deducted,” said Liew.

We helped track down the financial institutions and got her money back.

Her advice is to use the card right away. Also, make sure you understand the terms and conditions regarding the gift card you are buying.

No tax on cash valued gift cards

When you buy a cash valued gift card, the retailer is not supposed to charge tax on it. The tax is only charged when it's used to buy merchandise. The Financial Consumer Agency of Canada and Consumer Protection B.C. are very clear on that.

However, tax applies to cards that are specifically for a service like a haircut or massage.

If a retailer unfairly charges you tax on a gift card, report it to Consumer Protection B.C. or the Consumer Financial Agency of Canada.