Lots of people buy gift cards during the holiday season, which means that gift card scammers are hard at work. According to the FTC, consumers lost $148 million through gift card scams in 2021. That amount will almost certainly be higher this year.
If you’re considering purchasing a gift card, here’s what you need to know to keep yourself safe from the scammers.
There important things to remember about gift cards
Here are three things to remember about gift cards that will help you avoid most scams.
No legitimate debt collector will ask you to pay with a gift card
Many scammers pose as debt collectors and demand payment with gift cards. Often, they’ll threaten some adverse action if you don’t immediately pay. They typically use the threat of police action, foreclosure, or auto repossession to increase urgency. No legitimate debt will be collected via gift card.
How this might look: You receive a phone call from someone claiming to be with the IRS. They say that you have unpaid taxes and that they are going to send the police to arrest you if you don’t pay within a week. You can make a payment to them by purchasing a gift card at a local store. They then tell you how to send the gift card to them.
Here’s an article from the IRS that details how this scam works. Note that while the most common scam involves someone impersonating the IRS, that is not the only version of this scam out there.
Don’t be a money mule
A money mule is someone who receives and moves money associated with criminal activity. Criminals use money mules to move stolen or illegally-obtained funds. You can be a money mule unknowingly. If someone is asking you to buy gift cards on their behalf, be highly skeptical.
How this might look: Someone approaches you and asks you to purchase a gift card on their behalf. They pay you for the gift card—and may even pay you a small commission. You then are instructed to send the gift card back to them or to a third party. Fraudsters often recruit money mules through online job postings or dating apps.
Here’s more on money mule scams from the Consumer Financial Protection Bureau.
Be on the lookout for tampered gift cards
In the past few years, fraudsters have been increasingly reshelving tampered gift cards at retailers. They steal unactivated gift cards, record the redemption codes, repackage the cards, and reshelve them at retailers. They monitor the activation status of the gift cards and when a legitimate customer buys one of these cards, they cash it as soon as possible. The person who paid for the gift card does not know anything is wrong until they find their gift card with a zero balance.
How this might look: You purchase a gift card from a grocery store or gas station. When you open the gift card, you find that the gift card code has been scratched off or whited-out. The gift card inside the package may be damaged.
One of the blogs I follow, Miles Per Day, has a photo of what he found inside of a Vanilla Visa gift card that he purchased.
Gift cards as gifts… don’t do it!
A lot of people like to give gift cards as gifts. And it makes sense—the recipient can choose something useful and meaningful to them and you can have something to wrap up. But if you give a gift card that has been tampered with, you probably won’t find out that you’ve been the victim of fraud for months, if at all.
If you’re giving a gift card as a Christmas gift, you might buy it in early December. While your gift recipient may open your gift on Christmas, they may not try to use the gift card for another month or two. If you happen to have bought a gift card that has been tampered with, by the time your recipient finds out, scammers have had several months to drain the gift card and be off with your funds.
By the time you find out (if the gift recipient tells you) most likely you won’t be able to recover any of the money you spent. No merchant is going to make you whole on gift cards you purchased months ago. You will likely find it’s difficult to file a chargeback for a gift card purchase that is several months old. And the gift card brand is unlikely to be helpful. At best, it will be a huge hassle to get your money back. At worst (and most likely) you’ll just have to eat the loss.
If you’re going to give a loved one a gift card this season, consider giving them the gift card that they can use anywhere: cash.
An example of how Capital One is being helpful
I recently purchased a gift card using my Capital One card. Immediately after they processed the charge, I got this message via email and text message:
I love this. A notification like this reminding people of common gift card scams at the time they use their card to purchase the gift card should be something that every bank does. (I was purchasing a gift card for myself in this case.) I am certain that Capital One sending this message out is going to save at least a few thousand people from getting scammed this season. Bravo, Capital One!