New EMV Rules Squeeze Gift Card Sales

It is apparently getting harder to get a gift card out there, as retailers are making it harder to buy them. Some have started requiring cash-only purchases of the cards, others have cut them down to smaller denominations, others have put limits on buying multiple cards and some have just dispensed with selling them altogether.

Why?

According to The Wall Street Journal, new credit card rules have put them on the hook for fraud.

Consumers love gift cards. They are expected to load $651 billion onto prepaid cards this year, a 57 percent increase from six years ago, according to Mercator Advisory Group. About half of that comes from “open-loop” cards branded by Visa, MasterCard or American Express, which are not linked to any particular retailer. Unfortunately, criminals also really love gift cards and love to buy them up with stolen credit cards.

In the past, retailers would deal with that because they weren’t on the hook for that kind of fraud. With the new EMV rules, they now are, unless they’ve already upgraded their POS to EMV.

“Gift cards are a challenge,” said Mallory Duncan, general counsel at the National Retail Federation.

Grocery stores, small businesses and gas stations in general have been slow on the EMV front, though gas stations do have additional time. This has made them more vulnerable to gift card fraud.

According to Greg Ferrara, senior vice president of government relations at the National Grocers Association, small chains are now reviewing gift card policies, as the trade group has seen a big uptick in fraud of late.