In recent years, gift cards have become the top gift choice for many shoppers.

It’s not hard to understand why. Giving a gift card takes away the hassle of finding an appropriate gift, especially when shopping for a lot of people. Recipients, on the other hand, appreciate them more because gift cards give them the freedom to choose something they really want. No more itchy sweaters that don’t fit.

For retailers, gift cards are a means to generate additional sales and gain new customers. They also ensure future sales.

But as gift cards grow in popularity, retailers are beginning to see incidents of fraud. With more than $118 billion loaded onto gift cards in 2013 in the United States alone, it’s easy to see why gift cards have become an attractive target for criminals.

If your business includes a gift card program, it’s important that you know what these schemes are. So, how exactly do thieves commit gift card fraud? Read on as we expose their methods.

The Sticker. Most gift cards that are displayed on sales racks are just blank cards. A dollar value is added to the card upon card activation during purchase. In this scheme, a thief steals an inactive gift card and duplicates its barcode on a sticker. He then applies the sticker over the genuine barcode of another gift card in the store and waits for an unsuspecting customer to buy the altered card. When the sticker containing the barcode of the stolen gift card is scanned, it activates the previously stolen card instead of the gift card that the customer is buying.

Counter-measure: Hide the card’s barcode by covering it with a scratch-off coating. You can also train your staff to spot altered cards.

The Switcheroo. This scheme is usually perpetrated by unscrupulous employees, and gift card users become the victims. When customers pay for an item using their gift cards, they usually have a balance left on their cards. In this scheme, the employee keeps an active but zero-balance card by the register. When the employee receives the gift card from a customer during payment, he keeps the customer’s original gift card and gives the zero balance card to the unsuspecting customer.

Counter-measure: Add personalization options to your gift cards so it becomes easy for customers to spot if their cards have been switched.

Gift Card Cloning. Newer gift cards feature magnetic stripes where card information and dollar values are often stored. In this scheme, a gift card thief steals a blank gift card from store shelves and clones it using a card skimmer and a computer. He then returns the original gift card back to the store and waits for the card to be sold and activated. The fraudster then uses a browser script to automatically check the balance of the card daily via the Internet. When the card is eventually purchased and loaded with value, the thief is notified and uses the cloned gift card.

Counter-measure: Require a scratch-off PIN for balance checks via the Internet. You can also flag repeated or multiple balance checks as potential fraudulent activity.

Laundering. This is another form of gift card fraud that is committed by dishonest employees. In this scheme, the employee initiates the purchase of a $50 gift card on cash register number one without paying for it. He then buys two $25 gift cards on cash register number two using the $50 gift card as payment. Then, he goes back to cash register number one and voids the original $50 transaction, now ending up with two “clean” $25 gift cards.

Counter-measure: Instead of activating gift cards at the point of sale, require a scratch-off PIN to activate gift cards.

As gift cards become important revenue and customer retention tools for your business, it’s imperative that you give them the attention and security they deserve so your business – and your customers – don’t become victims of gift card fraud.