Gift card scams are on the rise: Here's how to avoid them

18.07.2024 - 14:16 / thepointsguy.com

Next time you think about getting a gift card from the display rack as a last-minute gift, you might want to think again. According to the Federal Trade Commission, gift card scams accounted for $217 million of the more than $10 billion U.S. consumers lost to financial scams in 2023.

There are several ways fraudsters can manipulate gift cards.

One of the most common gift card scams combines phishing and social engineering. In this type of fraud, a scammer impersonates one of your family members or coworkers, asks you to purchase gift cards and then requests that you give them the numbers so they can use the gift cards themselves.

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They will promise to reimburse you later, but because they aren't who they say they are, your repayment never comes. I've received several such requests, but I was aware of this scam and knew not to fall for the scammer's wily ways.

Another gift card scam, called gift card draining, is also on the rise. This one doesn't include getting a suspicious text message from your long-lost aunt asking you to buy her an Apple gift card, so it can be harder to spot.

TPG spoke with Frank Teruel, a cybersecurity expert and chief financial officer at Arkose Labs, to learn more about gift card draining and how to protect yourself.

With gift card draining, fraudsters tamper with the physical gift cards before they are purchased.

"Scammers can actually grab a bunch of unused gift cards from the store and take them home to disassemble them," Teruel told TPG. "They can use exacto knives or similar tools to open the cards very carefully and copy down the barcodes and pin numbers [or physically cut the important numbers off the card] before reassembling them and returning them to the store."

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When an unsuspecting shopper picks a tampered-with gift card off the rack and activates it, the fraudster has immediate access to the funds loaded onto the card. Once the scammer has the numbers on the back of the gift card, they can register it online through the provider as if they had purchased it.

"There's no money on the card, but as soon as someone comes along and buys it, the funds will go directly into the account the fraudster created," Teruel explained.

Gift card draining can go unnoticed for weeks or even months because people often don't use gift cards as soon as they receive them. When the recipient gets around to using the card, the scammer has already drained the funds.

This type of gift card scam became so prevalent during the 2023 holiday season that several law enforcement agencies, including the Miami Police