Scammers don't take the rest of the year off, but it's important to be extra vigilant during the holidays. It's not just your credit card that bad actors are targeting. If you're planning on picking up a gift card for someone, it'll behoove you to pay extra attention to it.
A February 2024 Federal Trade Commission report revealed that there were 5.4 million reports of identity theft, imposter scams and other types of fraud last year. Gift card fraud specifically resulted in the loss of $54.4 million in the third quarter of 2024, with 11,743 incidents reported to the FTC.
Considering the holidays are a popular time to purchase gift cards, here's what you should look out for.
What are gift card scams?
Gift card scams vary in terms of their complexity, but basically come in two forms: either you purchase a gift card for a fraudster or a thief drains the balance of the gift card before anyone can use it.
In the end, the criminal perpetrating the fraud gets their hands on the money on the gift card, leaving the victim with nothing to show for the money they spent.
5 gift card scams to watch out for
Some of the most common scams occur throughout the year, but the holiday season is a prime time as gift card sales increase.
Stolen and replaced gift cards
When a thief steals a gift card's balance before the recipient has the chance to spend it, it's called "draining."
The Better Business Bureau says this happens when scammers tamper with physical gift cards in stores, using handheld devices to get card information. Then they check the balance frequently.
Once a card is activated, they clone the card or create a counterfeit version and spend the funds immediately.
Some gift cards are drained in-store, but the U.S. Department of Homeland Security says that sometimes thieves will instead steal gift cards, tamper with them off-site and then replace them in stores.
How to avoid the scam: Check for signs of tampering on physical cards and don't purchase them if something seems off. The BBB says to run your finger over the back of the card to see if a sticker has been applied over the barcode. Look for any discrepancies in packaging between other gift cards the merchant has in stock.
Faked friend or family member
The FTC says to be wary if you receive what appears to be a text or message from a friend or family member who needs a gift card in an emergency situation. Advances in technologies such as AI like voice cloning have given scammers tools that make them harder to identify.
How to avoid the scam: It's always best to confirm with the person you think it is before sending any funds. Hang up and call the number of the friend or family member to confirm. If the original call was from an unrecognized number, it's likely a scam.
Online gift card scams
Although buying your gift card online can help you avoid getting scammed in-store, be wary of buying cards on gift card resale and auction sites.
Many of these sites are ripe with scammers who have already logged the gift card information so they can spend it quickly once the card is activated. The gift cards you think you're getting a deal on may be fake or stolen.
How to avoid the scam: The FTC recommends avoiding gift card auction sites that offer discounted cards, as these cards are prone to fraud and scams.
You've won a prize
In another common scam, you're contacted and told you've won a major prize. To collect it, you need to forward a gift card with funds to cover taxes or other charges.
In this scenario, the prize is fake and the gift card funds are spent immediately.
How to avoid the scam: Legitimate giveaways don't require you to pay anything to get a prize. If you didn't enter into a contest, question why someone would give you something for nothing.
Overpayment scams
In this scenario, a thief buys something from you online either through a site like Craigslist or Facebook Marketplace. They overpay you for the item with a check and ask you to send them back the additional funds via a gift card.
Not surprisingly, their check bounces due to insufficient funds or fraud and you're out the funds you spent on the gift card you sent them.
How to avoid the scam: Be skeptical of requests for gift cards as payment. Be wary of anyone who requests a gift card as payment in any situation, whether you're contacted by a "friend" in an emergency or someone overpays you for an item on Facebook Marketplace and requests a refund. Most of the time, these requests won't make sense.
What to do if you're a victim of a scam
If you accidentally give a gift card to a scammer or you end up with a gift card that had its balance drained before you could use it, the FTC says you should report the scam to the gift card company right away, even if it's been a while since you purchased the card. The agency also offers a list of retailers and card issuers that commonly sell gift cards.
When you contact the company, you can report the fraud and ask for your money back. There are no guarantees you'll get reimbursed, but it's worth reporting either way. You can also report cases of fraud to the FTC at ReportFraud.ftc.gov.
How using a credit card could protect you from fraud
You can also minimize damage from gift card scams by paying for gift cards with a credit card, which may offer purchase protections, including $0 liability for fraudulent purchases.
A card's purchase protection benefit won't extend to gift cards, but credit cards do offer built-in fraud protection. If you suspect fraud, you may be able to get additional help from your credit card issuer.