Pre-Paid Credit Card Fraud

Canadians lose millions of dollars every year to scams that threaten their identity, finances, and retirement. In 2020 alone, Canadians lost $130 million due to scams and just this year 46,077 cases of fraud were reported to the Canadian government.  

Fraudsters will try to scam you through various communications channels, such as email, phone, regular mail, text message, and more. Some may even try to communicate with you under the guise of a business or a government agent to gain your trust. One of the most common types of scams is prepaid credit card fraud. 

What Are Prepaid Credit Card Fraud?

Prepaid credit cards are a common target for fraud. Prepaid credit card fraud typically occurs when scammers gain access to your prepaid credit card number, whether it’s with your knowledge under false pretenses, or in secret. For example, scammers will call victims convincing them they owe a business or government body a certain amount of money. Then, they’ll convince the victim to pay the debt through a prepaid credit card. Once the victim tells the scammer the number on the prepaid credit card, the scammer empties the card balance and steals the money. 

Learn how to spot e-transfer scams

Types Of Prepaid Credit Card Fraud

There are numerous ways prepaid credit card fraud occurs. Below are a few examples of how Canadians have been victimized in the past. 

The Cell Phone Camera Technique

Some fraudsters will use their cell phone cameras to take a video of you while you’re making a purchase. Then, the scammer will examine the video, frame by frame, to obtain your card number and pin. With this information, the scammer can then use your card and make purchases online. 

To avoid this scam, make sure you’re always aware of your surroundings.  When entering your pin, use your hand to cover the numbers you enter. This is especially important when you’re making a purchase, whether it’s online in a public place, or at a cash register.

The Nigerian 419 Method

The Nigerian 419 is a popular scam that has victimized thousands of Canadians and Americans. Its name is a bit ironic given that it comes from the 419 section of the Nigerian legal code, which addresses fraud. With this scam, a scammer, who may or may not be from Nigeria, will contact an individual via text or email. They’ll usually try to lure you in by promising a large amount of money, however the catch is you’ll need to send them an advance fee to cover the cost of transferring the money.

Lately, 419 scammers will often ask for prepaid debit or credit cards instead of wire transfers. By obtaining the info on the prepaid card, the scammer can empty the card’s balance. 

To avoid this scam, never give out your prepaid card number to anybody. Make sure you are vigilant with your emails and think twice before getting excited about an unsolicited offer. If it feels too good to be true, it often is. When you see emails like this, just delete the email. 

Flash Attacks

Flash attacks entail collecting data from your credit or debit card’s magnetic stripe and using that data to create a cloned card. To skim your card’s data, the scammer usually will replace the traditional card reader with a fraudulent reader before you make a purchase. Scammers may do this by breaking into the store and replacing the store’s POS with a skimming device. Moreover, the scammer will be close by, to watch you input your PIN. 

Once they’ve collected all your information, they’ll be able to make multiple cloned cards and distribute them amongst other scammers to visit ATMs and drain the accounts quickly. Scammers love using flash attacks on prepaid cards because they don’t carry the same level of security as a traditional debit or credit card. Scammers might also use the data on your card to make online purchases. 

To avoid flash attacks, make sure you always cover your PIN when you’re inputting it into a card reader. Also, make sure to check your balance frequently to be aware of any suspicious transactions.

Check out how fraud alert can protect your finances. 

Deceptive Marketing

A deceptive marketing scam involves a scammer advertising an attractive product or service, such as a computer or laptop. The scammer will often exaggerate the product to make it appear more valuable than it is to entice the buyer. 

The buyer will make the purchase, and either be dismayed at receiving a product that is less stellar than expected or by not receiving anything at all. 

To avoid deceptive marketing scams, be wary of anybody who asks you to pay for something in advance with a prepaid card. 

Find out if police investigate credit card fraud.

Utility fraud

Utility fraud, also known as a phishing scam, entails a scammer posing as your local utility to take your money. The scammer will ask you to pay an overdue payment with a prepaid debit card, and might threaten to turn your power off if you don’t comply. 

To avoid scams like this, call your utility directly to verify any amounts owing before offering funds to anyone.

The CRA Prepaid Card Scam

The CRA prepaid card scam has become increasingly prevalent in Canada. Scammers will pose as a representative from the CRA and demand money owed in taxes. They will often threaten you with fines or jail time if you don’t comply. 

These scammers are vigilant, and sometimes know your personal information, including the amount of money you owe to the CRA. 

Then, the scammer will demand payment via prepaid cards and ask you to provide the card numbers over the phone or mail them to a fraudulent address. 

To avoid this scam, be wary of anybody who calls you from the CRA and demands payment via prepaid cards, cryptocurrency, or bank transfers. Make sure you never provide your prepaid card numbers to anyone calling you to pay off an alleged debt. Moreover, if you’re unsure if the money you owe is real, you can go to the official CRA website and use the contact number there. 

Emotional Threats

Sometimes scammers target your most prized values – your family and friends. They’ll use the people close to you to appeal to your emotions to defraud you of your money. For example, a scammer pretended to be a couple’s son and frightened his parents by telling them he was in a car accident abroad. The scammer then demanded money to pay for legal fees to keep their son out of prison, as he was charged with criminal negligence. 

To avoid this scam, never pay for any alleged debts using prepaid cards, cryptocurrency, or wire transfers. 

Find out if you can reverse an e-transfer once it’s deposited.

Loans Canada Lookout

LOOKING OUT FOR YOUR BEST INTEREST

How Do I Know If Someone Is Using My SIN?

READ MORE

Other Prepaid Credit Card Fraud To Watch Out For

Now that we’ve run through the most common prepaid scams, let’s take a look at a few more. 

Fake Lotteries

 A fake lottery scammer will call an individual and inform them that they won a lottery. Then, the scammer will instruct the individual to purchase a prepaid card and use it to pay for the taxes on his or her winnings. The scammer obtains the card number from the individual and steals the money. If you’ve won money, you shouldn’t need to pay for it! Be wary of any offers that feel too good to be true. 

Advance Fee Fraud

Advance fee scams entail an individual paying a fee in advance of a promised job, rental, or another event. For example, an individual might apply to a job ad and will be advised to pay $100 for a background check. The fake employer will ask for the money in a prepaid card. While some prospective employees actually do need to pay for background checks, employers won’t demand they do it via prepaid cards. 

Prepaid Rental Fraud 

Apartment rental scams are quite common in Canada, especially in Toronto during the COVID-19 pandemic. A scammer will post an ad for a rental online and demand a security deposit or application fee from a prospective tenant. The scammer will collect this fee before they even show the apartment. International applicants are particularly at risk since they often begin rental processes from outside of the country. To avoid this scam, remember that application fees aren’t legal in Canada and never provide funds to a stranger via a prepaid card. 

Learn your rights and responsibilities as a renter.

Romance Fraud

Romance scams involve a fraudster creating a fake relationship. Generally, they’ll approach you online and pretend to be interested. They may try to gain your trust for months before trying to ask for money. For example, they may ask you to help them cover the cost of their travels to come to see you. Other times they may try to use their connection with you to “help” them pay for emergencies. 

Repair Fraud

Repaid fraud occurs when a scammer poses as a technology consultant and convinces an individual to give them remote access to their computer. The individual thinks the scammer is fixing their computer or assessing it as a technology representative. Then, the scammer will convince the individual that something is wrong with the computer, whether it’s malware or other security issues. The scammer convinces the individual to purchase a prepaid card to pay for the service or somehow convince them to offer them access to a bank account. 

Avoid repair frauds by never paying for services or alleged debts using a prepaid credit card if you don’t know the individual calling you.

How To Protect Yourself

Because these scams are becoming so popular it is very possible that you will be contacted by a scammer pretending to be a legitimate company that provides loans. These scammers are professional criminals and they can be very persuasive so it’s important to both understand the details of the scams that they’re running and to protect yourself from becoming a victim. If you are ever in the situation where you are approached by one of these scammers here is the information you need to protect yourself.

• Do not give out your personal information to people who contact you first.
• Never provide a scammer with your credit card information or bank account information.
• Keep your date of birth and social security number private.
• Legitimate loan companies will never contact people at random to ask if they need loans.
• Legitimate loan companies will also never ask for any kind of payment via a prepaid card of any kind.
• Be aware of scammers who require a down payment or fee immediately before they can give you a loan.

Just remember that legitimate loan companies do not make the first move. If you’re contacted by anyone informing you that you have been pre-approved or are eligible for a loan it is most likely a scam and you should end contact with them immediately.

Additional Reading

Your Rights As A Borrower

Read Post

High-Cost Credit Legislation in Canada

Read Post

In Which Provinces Do Alternative Lenders Need a License?

Read Post

Bottom Line

Prepaid cards are a great, convenient way to spend money and to gift money as well. However, it’s important to stay just as vigilant for fraudsters with prepaid cards as you do with regular debit or credit cards. Scammers have many methods to collect your prepaid card information, so make sure you protect your PIN and think twice before giving out any personal information.