Newest Fraudulent Trend in Hotels

Hotel guests using gift cards as a form of payment are usually not causes for suspicion but with the latest trend in credit card fraud, hotels are in serious danger. Credit card thieves are reprogramming the magnetic strip on prepaid gift cards in order to artificially inflate the spending limit. It is nearly impossible to detect this type of fraud using conventional front office procedures.

Our company, R.A. Rauch & Associates, has not been immune.  In one situation, a chargeback was received for two hotel rooms, several food charges, and cleaning fees applied to the guest’s account.  In a separate instance, a chargeback was received for hotel rooms and other services resulting in a total loss of over $3,000.  Unfortunately, the last chargeback statement we received showed that our property was only one of four hotels in San Diego that were affected from the same prepaid gift card.  This demonstrates that hotels and resorts could be considered easy targets for this form of fraud.

As a result of these chargebacks, we have implemented a mandatory front desk procedure to combat this activity.  We treat all guests paying with a prepaid gift card as cash paying guests and our front desk agents follow these steps:

  1. Obtain a copy of the guest’s identification.
  2. Call the number listed on the back of the gift card to ensure funds are available.
  3. Create an internal note in the hotel’s operating system to identify that the card on file is a prepaid gift card.
  4. Compare the last 4 digits of the prepaid gift card with what has been electronically captured by the property management system.
  5. Do not accept any prepaid gift cards that do not provide a website or phone number printed on the card to verify funds.

In addition to taking these steps, the following warning signs of potentially fraudulent activity should be noted:

  1. Attempting to use multiple prepaid gift cards until one authorizes.
  2. Becoming overly agitated and potentially verbalizing the inconvenience of needing to provide ID and verifying the last 4 digits of the prepaid card with the electronically captured number.

If you implement this procedure at your properties, we hope that you will be able to avoid chargebacks similar to what we have experienced and stop the fraudulent activity before it occurs.


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