Reports have circulated in recent months about the hazards of dealing with internet scammers who rely on prepaid debit cards to conduct their fraudulent transactions. Once in the realm of wire transfers, scammers now rely on these easy to purchase, easy to share cards—some of which go under the brand names of MoneyPak, Green Dot, and Vanilla card, just to name a few—to conduct transactions and bilk their victims out of their money.
Essentially, scammers convince their victims to load a prepaid debit card with the funds then turn over the account number and the PIN number from the back of the card. Once the scammer has that information, he can deplete the funds from the card without leaving a trace. The funds are irretrievable and the scammers is untraceable. The victim is left with nothing.
Organizations like the ITRC have been warning people for a long time about the dangers of conducting business with prepaid debit cards. You are truly taking your chances if you agree to follow instructions that tell you to hand over the PIN number. It is akin to handing someone all of your virtual “cash,” as there is no consumer protection on those funds. You are strongly urged to never conduct a transaction in this way, and instead rely on reputable, traceable companies like PayPal for conducting online payments.
The Department of Justice nabbed two prolific thieves just last week who had ramped up their prepaid debit card crime spree, no longer content with petty amounts of money to be had by selling fake items to unsuspecting buyers. According to reports, the two men--Alpeshkumar Patel and Vijaykumar Patel—were finally arrested in Philadelphia on charges of a long-running series of scams that finally involved extortion and threats to physical safety
In at least one instance in 2013, a phone call made to a store in New Jersey ordered the store manager to load ten MoneyPak cards with $500 each, then provide the PIN numbers to the caller. Failure to comply would set off the bomb that the caller stated was in the store. The manager had completed the first MoneyPak card transaction when law enforcement arrived, cleared the store, and found that there was no bomb. This kind of extortion demonstrates both the creativity and the sheer disregard for their victims that scammers are capable of.
It’s important to keep in mind that prepaid cards can be a tremendous convenience and provide peace of mind. Parents have started using these cards so they’re not sending their children with a large sum of cash on a school trip, for example, and parents of older children enjoy being able to reload the card from home for their college students while knowing that the student cannot rack up a large credit card bill. They’re a great way to send a gift to someone without mailing cash, and they’re a nice “throwaway” card that can be used like a credit card without putting your sensitive information out there, such as for online transactions. But consumers must remember that these cards do not function like a credit card and do not have any of the protections that your actual debit card or credit card have. They are essentially the same as cash, only encased in plastic and containing a magnetic strip. Protect your card and your funds by protecting these cards as you would your hard-earned cash.