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I make it a habit to check my bank accounts every morning, just in case.
One morning, it paid off. I woke to find someone had charged $4,000 at McDonald’s and Hardees. They showed up on my statement as eight charges of $500 at each location.
How could someone spend $4,000 on fast food, I wondered?
As it turns out, I’d fallen victim to one of the best-known gift card scams. Someone uses a stolen credit card to purchase gift cards. Since gift cards operate as cash, even after I reported the fraud, there was nothing anyone could do. The thieves had a lifetime supply of Big Macs and Made from Scratch Biscuits.
Luckily, our credit cards have fraud protection, so I wasn’t liable, but it was an introduction to why gift card fraud is so popular with scammers.
What are Gift Card Scams?
Gift card fraud is on the rise, with scams tripling between 2017 and 2020, according to a Better Business Bureau survey.
There’s a reason for that.
Your name isn’t on a gift card you own. It isn’t attached to it in any way. You can hand it off to someone or resale it on services like Gift Card Granny or Giftdeals with no responsibility for how the funds are used.
The anonymity allows scams to thrive in a few different ways:
- Scammers use stolen funds to purchase a gift card
- Scammers tamper with physical gift cards at retail locations
- Scammers trick you into sending funds using your own legitimate gift card
- Scammers sell low-balance gift cards as full-value gift cards
- Scammers ask you to verify your gift card balance, then steal the card number and PIN
- Scammers collect gift card numbers via hacking and either use them or sell them
Now that we’ve taken a look at the basics, let’s break down the various scams, along with some ways to keep ourselves safe.
13 Types of Gift Card Scams
1. Fraudulent Purchase Scams
What is it? With this scam, a thief makes what appears to be a legitimate gift card purchase. It can take a while for the purchase to run through the system. By that time, the gift card is long gone, and the retailer is out the money.
How to spot it: As the victim, you’ll usually see it on your bank or credit card statement. In my case, I saw eight $500 purchases at fast-food restaurants. I’ve never spent more than $20 at a fast-food restaurant, so it stood out. But criminals may be clever and buy $20 or $25 gift cards at first to test the waters.
How to avoid it: Check your various bank accounts each day–both debit and credit cards. If you notice suspicious activity, report it immediately. Federal law limits your liability to $50, but it’s important to let your card issuer know as soon as possible to ensure you’ll be covered.
2. IRS Impersonation Scams
What is it? Someone reaches out to you, claiming to be an IRS representative. You’re told you owe back taxes and threatened with action if you don’t pay. The representative demands that you pay using a gift card. Sometimes the scammer even mentions a gift card from a specific retailer. When you purchase the card and call the supposed representative back, you’re asked to read off the gift card number and the PIN. The scammer then can use the funds to make purchases.
How to spot it: A call from the IRS can be scary. The good news is that the IRS doesn’t reach out that way. The IRS will also never ask you to pay via gift card. They don’t even accept it as a payment method.
How to avoid it: If you get a text, email, or phone call from the IRS, assume it’s a scam. Jot down the information, hang up, and contact the IRS yourself to see if there’s a problem that needs to be addressed.
3. Retailer Impersonation Scams
What is it? This type of impersonation scam has the contact pretending to be from a retailer where you hold an account. Often, fraudsters will pick popular retailers like Amazon or Apple. To verify your identity, they’ll ask that you buy gift cards, then send a picture or otherwise provide the numbers.
How to spot it: There would never be a reason to purchase a gift card to verify your identity. In fact, if someone contacts you, claiming there’s a problem with your account, you should always proceed with caution.
How to avoid it: Any time you receive a call or message about a problem with your account, go directly to the website in question and log in. Never click on a link or provide account information by phone unless you initiated the contact.
4. Personal Contact Impersonation Scams
What is it? It can be tough to ignore a friend in need. Scammers prey on our compassionate nature. With this scam, someone pretends to be a friend or relative and asks you to purchase gift cards. They may even create a lookalike social media profile. In some cases, the person poses as an employee’s boss and asks that gift cards be purchased for a client.
How to spot it: Social media profiles can be faked, and email addresses can be spoofed. The urgency is always a telltale sign. The scammer is hoping you’ll act quickly, without taking the time to think through the request. Fraudsters also sometimes have telltale errors in their messaging, such as misspellings or poor grammar.
How to avoid it: Always reach directly out to the person if you receive such an email. If you have a phone number, call or text directly.
5. Stolen Card Scams
What is it? At Christmastime, I get all my gift cards from a local retailer that offers bonus gas points for gift card purchases. That’s not the best idea. Why? Scammers target these locations because they can easily access multiple cards at once. They simply steal the number from the back and try to use it until one day it shows up as having been activated. Once activated, they have free access to any funds on that card.
How to spot it: Some retailers obscure the PIN until you scratch it off. Fraudsters will typically need that PIN to use the card. If the card number is exposed, it’s possible someone has captured the number.
How to avoid it: Purchase gift cards directly from the retailer, preferably online. If you’re buying at a gift card kiosk, check to see if the card number and PIN are exposed and AVOID buying gift cards that don’t have a concealed PIN. No matter where you buy your gift card, always save the activation receipt, and if you’re giving the card as a gift, provide the receipt to the recipient. In some cases, you can get the money refunded if the balance has been depleted when you try to use it.
6. Online Auction Scams
What is it? There’s no shortage of sites that buy and sell gift cards. If you have some lying around, you might even consider selling them. However, scammers take advantage of these sites to claim a partially used or depleted gift card has a full balance. Only after you’ve paid for it do you realize you were scammed.
How to spot it: Scammers typically don’t have a long history with a site. They also won’t have thousands of positive reviews. Look for any negative reviews before buying. Sites like eBay can be targets for scammers, but often fraudulent sellers will be relatively new to the site or will have very few reviews.
How to avoid it: If you want to buy gift cards on reseller sites, go with one that provides a guarantee. Some sites will take action against scams, while others won’t intervene. Also, always pay using a method that allows you to dispute a fraudulent transaction.
7. Balance Check Scams
What is it? Fraud can also hit online sellers. If you’re trying to offload an unwanted gift card, you could be approached by a hesitant buyer. This buyer doesn’t want to be scammed, and how can you blame them? The buyer has a clever way to verify your balance. You’ll simply agree to a three-way call with an automated system that has you input the gift card number and PIN. What you don’t realize is that as you input those numbers, they’re being collected by the scammer for later use.
How to spot it: Anyone contacting you asking you to provide the gift card number and PIN should be treated with suspicion.
How to avoid it: Avoid selling your gift card directly to buyers on sites like Facebook Marketplace and eBay. Instead, use a gift card reseller that has protections in place for both the buyer and seller.
8. Bank Card Balance Theft
What is it? More than half of U.S. consumers surveyed have at least one unused gift card. I can name at least three that we have right now. Scammers see opportunity in that statistic. With this scam, hackers use bots to probe gift card issuer systems in search of numbers that might not have been used yet. Whether it’s a bank or an individual retailer issuing the card, the bots are able to grab the information right off the server.
How to spot it: You won’t be able to spot it until you try to use the card. If you’re like me, it may be years before you remember you have the card, and by then, you’ll simply assume the balance expired or was depleted. The law requires card issuers to allow five years on a card before it expires, but I definitely have at least one card older than that. Do you?
How to avoid it: Gather all your gift cards and make a point to either use them or resale them on a reputable gift card resale site.
9. Fake Barcode Scams
What is it? We’ve already established that gift cards in store kiosks can be vulnerable to tampering. With this scam, a fake barcode is carefully placed over the real barcode on a card. When you activate it, the funds go onto the already-activated card owned by the scammer, refreshing the balance.
How to spot it: Take a close look at any gift card with an exposed barcode. Look for signs of tampering. The barcode should be printed onto the card, not printed on a sticker.
How to avoid it: To play it safe, buy gift cards directly from issuers. Look for cards that conceal the barcode or choose to buy your cards from a stand near a cashier, where they’re less vulnerable to tampering. Always save your activation confirmation receipt.
Credit: Thiếu Quân Võ Vũ
10. Refund Scams
What is it? This scam is one to watch for if you sell products. With a refund scam, a buyer asks for a refund but requests that you return the funds to a gift card that wasn’t used to make the purchase. You later learn the purchase was made with a stolen card, and the original purchase is disputed. You’re out the product and the money.
How to spot it: A request for a refund to be made to a separate payment method from the original purchase should always be questioned.
How to avoid it: Like many merchants, you should set a policy to only refund money to the original payment method.
11. Prize Scams
What is it? “Congratulations! You’ve won.” The problem is, you didn’t enter a contest. Or, maybe you saw the opportunity to win a prize on social media and entered. Either way, the person reaching out to you just needs you to redeem your prize with a gift card.
How to spot it: There’s no reason financial information of any type should be required to redeem a prize. If someone is asking for you to input a gift card number, bank account number, or username and password to access a prize, see it as a red flag.
How to avoid it: Never provide a gift card number or PIN to anyone but the retailer named on the card.
12. Tech Support Scams
What is it? Malware can mess up your day. So when you get an alert that suspicious activity has been detected on your device, you’ll likely be scrambling to fix the problem. With this scam, though, the “technician” who contacted you wants payment in the form of a gift card. When you provide the information, the scammer takes the money and runs.
How to spot it: Technicians don’t randomly contact consumers about technical support issues. Even if you’ve paid for a technical support plan, that team won’t reach out to you automatically, and they certainly won’t take payment in gift cards.
How to avoid it: If your business has an IT team, reach out to them before assuming the message has come from inside your business. Consider investing in a malware prevention tool. Bitdefender, Malwarebytes, and Norton 360 are all solid options from well-known companies. Never provide your gift card number and PIN to anyone but the retailer named on the card.
13. Cashier Scams
What is it? The last place you expect to have your gift card stolen is at the register. I’ve even used restaurant gift cards, where the server takes the card away to process it. But there is a known scam that has employees stealing gift cards from customers. The scammer either sees the higher balance on your card and swaps it with a lower-balance gift card or tells you there’s no money on the card, then pockets it to use later.
How to spot it: Often in this instance, an employee will be acting sketchy. A cashier might fumble with the card swiper or even attempt to take it out of your sight.
How to avoid it: Always track the balance of your card and keep receipts in case you need to prove it was stolen. If you suspect an employee might be scamming gift cards, let the manager know as soon as possible. If an employee is swiping the card in front of you, try to keep an eye on things to make switcheroos more difficult.
Credit: iMin Technology
Staying Safe from Gift Card Scams
Don’t stop buying gift cards yet. There are some things you can do to protect yourself and your gift recipients from scams.
1. Avoid Gift Card Kiosks
Those gift card kiosks can be so convenient. In fact, I just bought two cards at the grocery store down the street as a birthday present, but that convenience comes with some risks.
If we want to be super safe from scams, we should skip the kiosks and go straight to the retailer. In my case, I would have had to make two separate trips to restaurants – one 15 minutes away and the other next door to the store with the kiosk.
We can still enjoy the convenience, though, if we take a look at the card. Which leads me to my next tip.
2. Carefully Inspect Cards Before Buying
A valid gift card should have a card number, along with a PIN that’s hidden.
I just checked the two I bought earlier this week. The card number was visible, but the PIN was concealed beneath scratch-off print, similar to what you see on lottery scratch-off cards. My recipient will have to use a coin to gently rub the print off.
If the PIN is visible, skip buying the gift card, even if you’re buying directly from the store or restaurant.
Also, look at the card number. Check for signs that a sticker might have been placed over the original number.
3. Save Your Receipts
Yes, all your receipts. The activation confirmation, along with receipts for the items you’ve purchased with the card. With some merchants, the card balance will be printed on the receipt itself so you can monitor it as it depletes.
If you’re giving a gift card to someone, include the activation receipt with the card. Your recipient might be embarrassed to reach out to you if the balance is $0. That receipt shows the recipient where to go for recourse if the gift card doesn’t work.
4. Use Your Cards Quickly
Don’t be like me, with gift cards hanging out around your house with balances unused. The longer we hold onto these cards, the greater the risk they will be stolen.
Also, if you use your gift card right away, you’ll be able to verify that the full balance remains intact. Even if you have to save some of the balance for later, you’ll know exactly how much should be left on it.
If possible, pay attention to any expiration dates. If a gift card expires in five years, for instance, you’ll want to make sure you use it before the time is up.
5. Never Pay Third Parties in Gift Cards
The fine print on your card may urge you to “treat it like cash.” That simply means to tuck it away somewhere safe.
Gift cards aren’t cash. Far from it. They aren’t meant to be used as payment for tax debt or to verify your identity. If anyone’s asking for a gift card number and PIN, and that person isn’t an employee of the merchant listed on the card, it’s a scam.
6. Use Caution When Reselling
I once gave my mother-in-law a gift card to a national chain of spas. The problem was, that chain of spas happens to not have a location in her town.
I was able to resell the card on one of the well-known sites I mentioned above. I used the money to buy her a gift card to a place she could use.
Easy peasy, right?
But that could have easily gone astray if I’d used a site like eBay or Facebook Marketplace. Not that those aren’t solid places to sell certain items. They just fall short when it comes to protecting sellers against gift card scams.
Before you sell a gift card, check to make sure the site has protections in place for scams. The same goes for buying cards on resale sites. Gift cards should be guaranteed to be valid. If the site doesn’t offer a guarantee, you can’t be sure they’re getting rid of scammers to keep things safe for both buyers and sellers.
What to Do if You’ve Been Scammed
It’s too late. Someone got your gift card number. Maybe you bought a gift card with a $0 balance. Whatever the case, all isn’t lost. It can be difficult to recoup your losses after a gift card scam, but it’s not impossible. Here are some steps to take:
1. Contact the Gift Card Issuer
Assuming you still have the gift card, look at the phone number on the back. If there’s no number, or you no longer have possession of the card, track down the customer service number online. Gather all your documentation, including purchase receipts and online statement transactions. Be prepared to cite full dollar amounts and dates and times.
Once you have someone on the phone, explain the issue.
- If you paid a scammer, provide any contact information you have
- If you purchased a gift card and there’s a balance discrepancy, give exact dollar amounts and offer to send copies of the original purchase receipt and validation confirmation
- If some of the balance remains, ask that the amount be refunded immediately to your original payment method
- Try to get the original balance down to $0 if you think a scammer might continue to access the funds
2. Contact the Original Purchase Location
If you purchased the card through a kiosk or reseller, you’ll likely be directed to the merchant who issued the gift card. Once you’ve reached out to them in Step 1, you should also let the business issuing the cards know. If someone tampered with cards, the business will hopefully take action to prevent it in the future.
3. Consider Identity Theft Protection
Fraudsters can use your information to commit identity theft. A little peace of mind can go a long way.
Identity theft protection helps cover the cost of repairing your credit after an identity theft incident. Some services even monitor your identity and alert you to signs of fraud.
Some great services to consider are Aura, LifeLock, and IdentityForce. Compare prices and services and find the one that works best for you.
4. Report it to the FTC
The Federal Trade Commission investigates fraud in an effort to keep consumers safe. You can report fraud attempts through the FTC website.
Gift card fraud is becoming increasingly common, and scammers seem to constantly find new ways to use gift cards to their advantage. By being aware of the scams and taking precautions when buying and using gift cards, you can enjoy the convenience while still staying safe.
Read More: Identity Theft: Which Signs To Look For?
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