I've always wondered: what's the point of the gift card system at Costco? Don't most stores solve this nicely by making the gift cards valueless until "activated" by the cash register system?

As I understand it, the gift card scam goes like this:

1. Perp steals the inactivated gift card, takes it home

2. At home, they scratch off the activation code, record it, and re-apply some scratch off coating

3. They reverse shoplift the gift card and return it to the store

4. They then set up some script to continuously try the gift card activation code

5. Legitimate customer buys and activates the gift card

6. Perp now gets access, and drains the funds before the legit customer can use them

It seems to me that two simple steps would go a long way to reducing the effectiveness of this:

1. Require a CAPTCHA when attempting to redeem a gift card's code

2. If someone has tried to redeem an unactivated gift card's code before, the point-of-sale system should refuse to let that gift card ever be activated, instead telling the cashier to throw it away and get the customer a different one

Isn't the activation code scratch off area covered with a very hard to counterfeit zigzag/special material moire pattern?

Sure, but now you have to train your checkout staff to be experts in scratch off coating design. Retailers are definitely adding training material to help, but it still happens.

You can easily buy a roll of them as stickers for a few cents each, no special machinery needed to apply.

Sounds trivial to catch them if there's shop camera recording + logs of scripts...

Someone trying inactive code repeatedly is a huge red flag.

You vastly overestimate the competence and initiative of US law enforcement.

Lots of things that are trivial simply do not occur.

That is how most grocery stores do it, but Costco offers GCs to local restaurants that I've never seen elsewhere (Armadillo Willy's!). It's quite possible that the GCs from these restaurants are not capable of being secured/activated in this way.

Or it could just be that they want to have a big display with cardboard logos that will catch the attention of shoppers.

I assume it’s because they also do things like “movie ticket vouchers” (which are just paper). That way there’s one dedicated-ish room for all the gift card exchanges.

costco also does this with lots of higher value things, like a gopro or a laptop, if you want to buy it you take the cardboard tag to the checkout and then they give it to you after payment.