Loyalty Rewards Programs — What’s Legit and What’s a Scam

Apply for online customer loyalty rewards and you might end up making unexpected (and unwanted) monthly payments: Internet Scambusters #369

In this week’s Snippets issue, we throw the spotlight on a legal $1.4 billion scandal based on luring people into signing up for loyalty rewards programs.

Loyalty rewards programs, like coupons, discounts and cashback, are a long-established, effective method retailers use to keep their customers coming back. They make sense for both sides.

But with some schemes, customers don’t even realize they’re signing up, and it’s costing them a fortune, as we explain in this week’s snippets issue.

We also have warnings for people planning to sell unwanted gift cards online and movie fans who want to become extras, plus details of the latest H1N1 flu scams.

And now for the main feature…

Loyalty Rewards Programs — What’s Legit and What’s a Scam

The recent disclosure that certain online loyalty rewards programs may be misleading people into unwittingly signing up to make monthly payments has sounded an alarm that has even echoed through the committee rooms of the US Senate.

That’s the main focus of our snippets issue this week, in which we also look at a cunning retail-related scam — phony gift card purchase schemes.

And there’s just room to squeeze in a couple more topical scam snippets — a widespread bogus offer for people wanting to be movie extras and the latest H1N1 “swine flu” scams.

But first, let’s take a look at the loyalty rewards question…

Have online retailers sold your credit card info?

For the purposes of this issue, what we mean by customer loyalty programs are offers that make an appearance after you think you’ve completed an online purchase.

You know the sort of thing: Either there’s a button on the sale completion page offering to reward you for purchasing, or a pop-up that does the same thing.

The loyalty reward may be a cash card, a gift card or a discount off your next purchase, usually for $10. However, in some cases, it’s not from the company you just bought from, but from a separate loyalty rewards company, though that won’t always be apparent.

These schemes are quite distinct from those operated by online retailers like Amazon where you get genuine discounts for placing regular orders. Those are true rewards for deals you can cancel any time.

They don’t cost you money — they save you cash — whereas, as thousands of Americans are discovering, that’s not always the case with customer loyalty programs operated by some marketing firms that have struck a deal with certain retailers.

When these marketers’ offers pop up at the end of the purchase, many shoppers may think they’re still on the site they bought from.

Not so. By clicking on the reward button, they’re actually transferred to another site that tells them how to get rewards or claim discount on a future purchase.

There’s nothing wrong with that in itself. The company may provide a genuine reward.

Some ask you to complete a questionnaire (which is usually a come-on for further purchases and offers).

Others just want your name and email address. But buried in the fine print may lurk a bomb. By providing your email address, you could be signing up for something else — an extended customer loyalty program operated not by the retailer but by the marketing company.

It’s perfectly legal and they may still provide you with discounts or money-saving offers but their service will be charged to your credit card every month.

They don’t have your card number? Guess again. You entered it when you made the original purchase. A deal with the original vendor ensures loyalty program operators get your credit card number.

You have no idea you’ve signed up until you get your credit card bill.

Once again, it’s important to distinguish between these and perfectly open loyalty program sites which offer a free month of membership if you give your credit card info, and then only charge you if you don’t cancel. Canceling is usually easy and they honor it. It’s also clear that you are joining and that you will be billed if you don’t cancel.

Many bricks-and-mortar retailers also offer loyalty “club” cards that you pay for in return for significant discounts on future purchases. They’re fine too — if the math works for you.

But this upfront approach is not the way some other online loyalty programs operate. A Senate Commerce Committee recently learned these schemes generated more than $1.4 billion by “misleading” online shoppers by not making the monthly payment requirement obvious. They then paid half of that to the retailers for giving them the credit card info.

The outcome may be that when the Senate finishes its deliberations in a few months’ time, a law change could ban retailers from passing on credit card information to marketing firms.

In the meantime, we urge you to be sensibly cautious before accepting these third-party loyalty reward offers. Always read the fine print very carefully and establish if it’s going to cost you money and how easy it is to cancel. Then it’s up to you to decide if you want to go ahead.

Scammers plan to clear out your gift card balance

After the “season of giving” some of us can find ourselves with a surplus of gift cards from stores where we can’t or don’t want to shop.

The Internet provides the answer. Why not sell them — usually at a discount — to someone who can use them?

Looks like a win-win situation — until you encounter the gift card scam artists.

Here’s how they work: You offer your card on an auction or classified ad site. A “buyer” asks for an electronic snapshot of your balance as proof of its value.

They direct you to a bogus site, usually in the format of “My” followed by the store name, followed by “Giftcard.com” (e.g. “MyStoreNameGiftcard.com”), where they say you can get this snapshot.

As soon as you key your card details in, the scammer has them and will use or transfer the balance as quick as a flash. That’s it. You won’t get your money back.

So, if you do have gift cards from Christmas — or any other time — to sell, we recommend you use one of the sites specially set up for these transactions (do a Google search for “gift card exchange” — but, remember, always double check the credentials of any company you deal with). And recognize even the legit exchanges often charge a hefty fee.

Or you could just “regift” them.

Movie casting call is a con trick

Fans of the vampire movie saga Twilight are being targeted in a bogus message claiming to be recruiting extras for the fourth film of the series.

An email invites them to register for walk-on parts in the new sequel, called Breaking Dawn, offering fees of up to $250 a day and saying no experience is required.

People who sign up for free are then told they must pay to view scheduling and location details of the casting call.

The reality: Recruitment of extras for this fourth film hasn’t started (the third movie — Eclipse — hasn’t been released yet) and when it does, there’ll be no charge for the details, which, says a casting spokesperson, will be advertised.

(Note: Sorry, but we have no details on how to apply for these jobs — so please don’t ask. We suggest a Google search on “Twilight casting agency.”)

More H1N1 flu scams

Since we first warned about scams relating to the H1N1 flu virus (referred to at the time as swine flu), many new flu scams covering so-called protection kits and other schemes have swamped inboxes and the Internet.

A new scam approach comes in the form of an email with a subject heading like “State Vaccination Program,” which invites recipients to create an online profile that includes confidential information. This is a phishing scam.

A variation includes a link to a website that downloads malware onto victims’ PCs.

In fact, there are no nationwide or statewide registration programs that operate in this way. If you want to know more about your vaccination eligibility, contact your county health department.

That’s it for this week’s four-way snippets issue. Whether you have ambitions to be a movie extra, to avoid the H1N1 flu virus, to sell a gift or to pick up loyalty rewards for making a purchase, healthy skepticism is your first line of defense!