Be aware! – All the facts you need to know about the Gift Card scam

Gift card scams are a pervasive and growing problem, particularly those involving gift cards purchased in grocery stores and pharmacies. These scams are often sophisticated and target unsuspecting individuals, taking advantage of the convenience and popularity of gift cards as a form of payment or gifting. The scam involves purchasing a gift card, which is then drained of its value before the purchaser or recipient even has a chance to redeem it. Understanding the dynamics of this issue, how the scam works, and what steps can be taken to prevent falling victim to it is critical for consumers.

Overview of Gift Cards

Gift cards have long been a popular option for gifting, providing flexibility to the recipient to purchase what they like. Major retailers, online platforms, and financial institutions offer a wide variety of gift cards, from branded cards tied to specific stores (e.g., Walmart, Target, or Amazon) to more generalized cards from Visa, Mastercard, and American Express that can be used almost anywhere. In addition to being a popular gift, these cards are also frequently used for promotional purposes, corporate incentives, and even in fundraising efforts.

However, as gift cards have gained in popularity, so too have scams associated with them. Scammers and thieves have developed increasingly sophisticated methods for accessing the funds loaded onto gift cards. These scams can happen quickly and without the victim being aware that anything has gone wrong until it’s too late.

The Basics of the Gift Card Scam

The core of the gift card scam is quite simple: thieves drain the balance from gift cards before the rightful owner has a chance to use them. There are multiple variations of how this scam can play out, and it often depends on how and where the card was purchased.

1. Manipulation at the Store: One of the most common methods involves scammers physically tampering with gift cards in grocery stores or pharmacies before they are sold. Scammers will go to a store, take a gift card off the rack, and record its number and access codes. Sometimes, this is done by carefully peeling back protective stickers or scratch-off areas on the card that cover the PIN or security code. In other instances, they may replace the protective covering with a counterfeit one that looks nearly identical to the original.
2. Activation Timing: Once a scammer has the card information, they continuously check online or through automated systems to see when the card has been activated by the purchaser. As soon as the card is activated and loaded with money, the scammer will quickly spend the balance or transfer it to another account. By the time the legitimate buyer tries to use the gift card, the funds have already been stolen.
3. Fake Gift Card Websites or Customer Service Numbers: Another variation of the scam involves fake websites or fraudulent customer service numbers. Victims may attempt to check the balance on their gift card through what they believe is the official website, only to find out later that they were tricked into entering their gift card details into a fraudulent site. Scammers use this information to drain the card’s balance.
4. Phishing or Impersonation Scams: Scammers often impersonate legitimate organizations or individuals, such as tech support, government agencies, or even family members, and ask for payment via gift cards. Victims are pressured into buying gift cards from grocery stores or pharmacies and providing the card numbers and PINs to the scammer. Once the scammer has this information, they can quickly steal the funds, and the victim is left with nothing.

The Extent of the Problem

Gift card scams have become so widespread that the Federal Trade Commission (FTC) has issued numerous warnings and advisories to consumers. The problem has grown significantly in recent years due to several factors:

1. Ease of Anonymity: Gift cards are appealing to scammers because they offer a level of anonymity that other payment methods do not. Unlike bank transfers or credit card fraud, which can often be traced, it is much harder to track the illicit use of a gift card once the funds have been stolen.
2. Unregulated Sales in Retail Stores: Grocery stores and pharmacies often have racks full of various gift cards, making them an easy target for scammers. These retailers usually don’t monitor their gift card inventory closely, leaving room for tampering or fraudulent activities.
3. Vulnerable Populations: Many victims of gift card scams are elderly individuals, immigrants, or others who may not be familiar with the intricacies of digital payments. They are often targeted through phishing scams, threatening phone calls, or impersonation schemes, and are coerced into purchasing gift cards to resolve a fabricated issue.
4. High Volumes of Purchases: Gift cards are frequently bought in bulk during holidays, birthdays, or special events, which can lead to lower scrutiny by purchasers. Busy consumers may not immediately check the balance or verify the card’s authenticity, giving scammers ample time to drain the funds.

How Scammers Exploit the System

Scammers have become increasingly adept at exploiting the vulnerabilities in the gift card system. The following are some of the common tactics they use:

1. Store Racks and Access: As previously mentioned, scammers frequently target gift card racks in stores. These racks are often located in highly visible but low-security areas of the store, allowing scammers to tamper with the cards without being noticed. In some cases, scammers may swap out legitimate cards with pre-tampered ones, or they may record card information and replace the card on the rack for an unsuspecting customer to purchase later.
2. Digital Hacking: Scammers don’t always need physical access to the card to carry out their theft. Many scammers use digital tools to randomly generate gift card numbers and check them against retail systems to see if they are valid. Once they find an active card, they can drain the balance, often within minutes of activation. This kind of digital “hacking” can be done on a large scale, with scammers testing thousands of numbers at a time.
3. Sophisticated Phishing: In phishing scams, victims are lured into providing gift card information through seemingly legitimate emails, websites, or phone calls. These scams often involve impersonating well-known companies, government agencies, or even family members. Scammers use urgent language, threatening consequences if the victim doesn’t comply. For example, someone may receive a phone call claiming that they owe money to the IRS and must pay immediately using gift cards purchased from a grocery store. Once the victim provides the card information, the scammer disappears.
4. Fake Redemption Websites: Scammers also set up fake gift card balance-checking websites. When a victim enters their card number and PIN to check the balance, the scammer collects the information and uses it to drain the card. These websites often look almost identical to legitimate ones, making it difficult for the average person to distinguish between them.

Case Studies: How Scams Play Out in Real Life

To better understand how these scams play out, let’s examine a few real-life examples of gift card fraud and their impact on consumers.

1. Grandparent Scam: An elderly woman in Ohio received a phone call from someone claiming to be her grandson. The caller said he was in legal trouble and needed money for bail. Panicked, the woman was instructed to purchase several gift cards from a nearby pharmacy and provide the card numbers to the caller. After she did, the funds were stolen, and the caller disappeared. It turned out her grandson had never been in trouble—she had been scammed out of $2,000.
2. Fake Tech Support: In another case, a man received an email that appeared to be from Microsoft, claiming his computer had been infected with a virus. The email provided a phone number for tech support, which he called. The person on the other end instructed him to purchase gift cards from a grocery store and provide the card information as payment for the virus removal service. By the time he realized it was a scam, the funds were long gone.
3. Compromised Cards: A woman in California bought several gift cards as Christmas presents from a local grocery store. When her son tried to use the card, he found that the balance had already been spent. Upon investigation, it was discovered that scammers had tampered with the cards while they were still on the store’s shelf, recording the card numbers and waiting for them to be activated.

Preventing Gift Card Scams

While gift card scams can be devastating, there are steps that consumers can take to protect themselves and reduce the risk of falling victim to these schemes.

1. Buy Gift Cards from Secure Locations: When purchasing gift cards, it’s important to buy them from reputable, secure locations. Avoid purchasing gift cards from grocery stores or pharmacies where the cards are easily accessible to the public. Instead, opt for purchasing them directly from the retailer’s website or from the customer service desk where the cards are stored securely.
2. Inspect the Card Carefully: Before purchasing a gift card, inspect it closely for any signs of tampering. Check to make sure the PIN number has not been scratched off or that the packaging has not been altered. If anything looks suspicious, don’t buy the card.
3. Check the Balance Immediately: After purchasing a gift card, check the balance immediately to ensure the funds are intact. This can be done through the retailer’s official website or by calling the customer service number provided on the card. If you notice any discrepancies, report them to the store and the card issuer right away.
4. Be Wary of Requests for Gift Cards as Payment: One of the most important things to remember is that no legitimate company or government agency will ask for payment in the form of gift cards. If someone asks you to pay with a gift card, it’s almost certainly a scam. Be especially cautious if the request is urgent or comes with threats of legal action or other consequences.
5. Report Suspicious Activity: If you suspect that you’ve been the victim of a gift card scam, report it immediately to the retailer where you purchased the card, as well as to the card issuer. You should also file a complaint with the FTC, your local law enforcement, or the Internet Crime Complaint Center (IC3).

What Retailers and Card Issuers Are Doing

Retailers and gift card issuers are also taking steps to address the growing problem of gift card scams. Some of the measures being implemented include:

1. Enhanced Security Features: Many retailers have started using more advanced security features on gift cards, such as tamper-evident packaging and hidden PIN numbers that are revealed only after purchase. These features make it more difficult for scammers to access the card information before it is sold.
2. Monitoring for Fraudulent Activity: Retailers and card issuers are increasingly using technology to monitor for suspicious activity on gift cards. For example, some companies use algorithms to detect when a card number has been tested repeatedly online or when large transactions are made immediately after activation. When fraud is detected, the card can be frozen before the funds are stolen.
3. Limiting Gift Card Purchases: In some cases, stores have implemented limits on the number of gift cards that can be purchased in a single transaction, as well as restrictions on how much money can be loaded onto a card. These measures are designed to make it more difficult for scammers to exploit the system.
4. Consumer Education Campaigns: Retailers and government agencies are working together to educate consumers about the risks of gift card scams. Public service announcements, online resources, and in-store signage are being used to warn people about common scam tactics and how to protect themselves.

So be on the lookout!

Gift card scams are a serious issue that affects countless consumers every year, particularly those who purchase gift cards from grocery stores and pharmacies. The convenience of gift cards makes them an attractive option for both buyers and scammers alike, but by understanding the risks and taking proactive steps to protect themselves, consumers can reduce their chances of falling victim to these scams.

Whether through tampering with physical cards or using digital hacking techniques, scammers have developed numerous ways to exploit the gift card system. However, with increased awareness, vigilance, and the implementation of security measures, both consumers and retailers can work to combat this growing problem.