Social Development Minister Paula Bennett says she is hearing stories of youth payment cards being misused, including food and batteries being purchased then sold on for cash.
The Youth Service Payment card is being rolled out by the Government for 16- and 17-year-old beneficiaries and some teenage parents.
The card is loaded with $50 a week which can be used to pay for food and other items, but not alcohol or cigarettes. It requires a PIN number and a signature for verification.
Mrs Bennett says she has been told by retailers and others in the community that people using the cards have been selling on food or batteries.
"People buy 10 cooked chickens and then go and sell them in the carpark. I can't stop what individuals do. All I can do is try and put the right security around it."
Security and banking experts say those security measures are too weak and could lead to fraud.
David Tripe of Massey University's finance, banking and property centre says signatures are hardly ever checked and can be forged.
However, the minister says she has been assured by Work and Income that having a verified signature to access the funds is best practice.
Mrs Bennett says the cards are as secure as a credit card, but is expecting a full briefing from Work and Income this week.