Gift cards are big business. We’ve spent $522 billion on them since 2010 – including $124 billion in 2014 alone. Gift cards have also been the most requested type of present for eight straight holiday seasons, according to CEB TowerGroup and the National Retail Federation. Heck, more than $44 billion in gift cards have even gone to waste since 2005, including $750 million in 2014.
The problem is, fraud happens to be a booming industry as well. Not only have a string of high-profile data breaches endangered consumer data and shaken our collective confidence, but billions of dollars in losses are reported each year due to payments fraud and identity theft. And while credit cards and debit cards garner most of the attention as far as fraud is concerned, the combined popularity of gift cards and brazenly determined fraudsters indicates that something fishy must indeed be going on at their intersection.
With that in mind, WalletHub has investigated the most common gift card scams being perpetrated these days and prepared a list of tips to help you avoid losing money to them. So, check the information out below and become a more informed, better protected consumer.
Fraud is always evolving. It must adapt to changes in consumer awareness and the strategies of law enforcement officials in order to survive. So while the scams listed below have been the most common in recent years, there is no telling how fraudsters will attempt to abscond with your funds in the future. You must therefore familiarize yourself with old tactics and be on the lookout for new ones. And, if you hear about a new scam gaining steam, make sure to let everyone know about it in the comments section below.
- Store Employee Code Stealing: Nefarious store employees have been known to perpetrate a number of different scams that involve stealing the redemption codes off gift cards – either by scanning the card or by tampering with its physical packaging (e.g. revealing the card number via scratch-off). The employees can then spend the balance once the card is activated upon purchase by a consumer.
- Selling Counterfeit Gift Cards Online: The online resale market for gift cards has risen in accordance with the growth of the overall gift card market. And there are a number of ways to protect yourself from the threat posed by counterfeit gift cards, from checking a gift card’s balance prior to purchase to exercising common sense – because a deal that seems too good to be true probably is.
- Overstating the Value of Gift Cards for Sale: Much like some criminals have been known to sell counterfeit gift cards online, others resort to a different type of deception: lying to buyers about their gift card’s balance. Thieves are often aided in this endeavor by gift card packaging that displays a certain monetary denomination. Again, verifying a gift card’s value prior to committing to buy it is always recommended.
- Swap-Outs: Sometimes, store employees will activate a shopper’s gift card only to hand them a blank card and pocket the plastic with value on it.
- Claiming Card Damage: Consumers have been known to steal un-activated gift cards from a store and then attempt to return them at a later date, claiming the cards don’t work. This scheme doesn’t work very often either, as most store employees will ask for a receipt.
As is the case with fraud and identity theft more generally, there are a number of steps that you can take to protect yourself from gift card scams.
- Save Your Receipts: Having a record not only of your gift card purchase but whatever you buy with it will enable you to better document and recover from any fraud that might crop up. Proof of your card’s original denomination – which will be printed on your receipt – and a list of the legitimate subtractions from it will reveal how much was stolen from you.
- Keep Track of What You Spend: A clear sense of how much money remains on your gift card is important because it enables you to accurately plan your purchases and avoid overspending as well as notice if anyone begins draining your balance. You can generally check your card’s balance online or by calling a toll-free number.
- Verify a Resale Card’s Balance Before Buying: Never purchase a gift card from a third party (i.e. not directly from the affiliated retailer) without first verifying its balance. You want to get what you’re paying for and avoid any surprises. You can determine a gift card’s balance by calling the number on the back of a card and entering the card number.
- Use a Reputable Gift Card Exchange: One way to add legitimacy to the second-hand gift card market is to shop at a reputable gift card exchange like WalletHub.com. We do our best to only present you with legitimate offers and to educate consumers about safe gift card transactions.
- Buy a Gift Card After Buying a Gift Card: If you purchase a gift card from another individual and the card’s number is displayed, the best thing to do is use that gift card to buy another gift card online. That way the seller can’t just turn around and use the sold card’s number to do some online shopping. If the card requires you to scratch to see the number, then there’s no need to worry.
- Look for Signs of Tampering: If your gift card has any kind of packaging or a sticker covering a redemption code, make absolutely sure these materials have not been manipulated prior to checking out. This can be a sign of thieves gaining access to your card information, enabling them to spend your balance once the card is activated.
- Register Your Card: Many retailers allow customers to register their gift cards online in order to easily spend the funds on the company’s website as well as keep tabs on how much money remains. Doing so may enable you to notice unauthorized access to your funds sooner.