A gift card from their favorite store ranks as many consumers favorite gift. But for merchants, gift cards can be the vehicle for expensive theft and fraud against its customers and the store. The National Retail Foundation discovered in a recent survey that 78 percent of retailers have been victims of gift-card fraud. Interestingly enough, most gift-card fraud against brick and mortar merchants is either the handiwork of professional thieves or store employees looking to make some extra cash, not the casual shoplifter. Every day thieves are figuring new ways to use gift cards to steal and merchants must stay on their toes to prevent fraud.

Here are four steps merchants can take in prevention:

1. Keep an Eye on Gift-Card Racks. Tampering with cards by stealing the numbers or scratching off the protective strip is a common form of gift-card theft. "Keep your gift cards in a location where clerks can watch customers to make sure that no one is tampering with the cards," says Brian Riley, senior research director at CEB TowerGroup's Retail Banking practice. "Make sure that all cards have a scratch off strip hiding the number from theft." Since thieves often steal gift-card numbers that have not yet been sold, monitor your website as well for excessive queries on cards that have not been activated yet. He also recommends video monitoring of gift card racks to catch angles the clerk can't see.

2. Raise a Red Flag for Zero Balance Complaints. If multiple customers complain that they have received gift cards with a zero balance, it's possible you've got employees replacing customer gift cards with gift cards that have zero balances at the register, since this is often an inside job. Terry Maher, general counsel for the Network Branded Prepaid Card Association, says that in this common theft, an employee rings up the purchase of a gift card on one register and then uses the gift card to purchase a second gift card on a separate register. "The employee then voids the purchase of the first gift card after the second card has been activated," says Maher.

He recommends setting up your gift card process so that the card is only activated once the sale is logged and the money is in the register. If you use a point of sale system, flag all gift card voids for daily management review to make sure there aren't fraudulent transactions. He suggests using video surveillance in the cash register area to monitor employees as well as keeping all used gift cards in a secure area so they are not used for fraud.

3. No Identification, No Return. Thieves, often called "boosters," will sometimes return stolen merchandise in exchange for gift cards and then have the gift cards fenced. Have a clear policy for returns, such as requiring identification and only accepting returns during a specific time period. Christopher McGourty, founder of the National Anti-Organized Retail Crime Association, recommends entering all return information into a database to track customers who are returning a high volume, returning to different store locations or returning multiples of identical items.

4. Compare Number of Gift Cards Activated with the Number Sold. Each week use the report provided by your gift card provider to compare the number of cards that were activated with the number that your point of sale or register shows as sold. If you notice a large discrepancy, then your employees may be turning off the register after a gift card is activated. "When this is done at the right time, the card is activated but there is no evidence that the card has been sold," Maher says.