Gift cards are a top holiday gift choice, easy to give and fun to receive. Whether it’s for a stocking stuffer or a holiday surprise, they’ve become a go-to option for many. However, if you’re planning on gifting a few this season, it’s essential to be aware of potential scams.

In 2023 alone, gift card-related fraud amounted to a staggering $217 million. This rise in card-draining scams has prompted several states to propose new laws to curb the trend, underscoring the importance of staying vigilant when purchasing these popular gifts.

What Are Gift Card Scams?

Gift card scams can happen at any national retailer. Most often, scammers target gift cards displayed on racks, especially in popular stores like Target and CVS. These scams, often referred to as “card-draining” scams, involve fraudsters tampering with the gift cards before they’re even sold. Here’s how it works:

  1. Barcode Tampering: Scammers remove the legitimate barcode from the gift card and replace it with a fake one. The fake barcode is linked to the scammer’s account, meaning that when the card is activated at checkout, the funds are directed to them, not the person you’re buying the gift for.
  2. Magnetic Stripe Reading: Scammers can also use magnetic stripe readers to capture the card information. They’ll monitor the card’s activation status, then drain the funds as soon as it’s activated. Unfortunately, this means that when the giftee goes to use the card, the balance is often already zero.

Shopping for Gift Cards? Here’s How to Protect Yourself

If you’re buying gift cards this holiday season, here are some quick tips to keep your gift and recipient safe:

  • Activate by Phone: Many scammers set up fake activation websites to steal information. Activating by phone can be a safer option.
  • Check for Tampering: Before purchasing, inspect the packaging. If the gift card’s packaging looks damaged or tampered with, alert a store employee and request a new card. Alternatively, consider sending an eGift card directly to the recipient’s email.
  • Choose Locked Cases: When possible, purchase gift cards from behind a counter or in a locked case. These cards are less likely to have been tampered with.
  • Document the Purchase: After buying the card, take a photo of it and save your receipt with the activation code. This can be useful if you need to report any fraud later.
  • Use Gift Cards Quickly: If you receive a gift card, it’s best to use it as soon as possible. This reduces the chance of scammers draining the balance while it sits unused.
  • Report Fraud Immediately: If you encounter any issues with your gift card, report it to both the store and the Federal Trade Commission (FTC) via their website.

By taking a few precautions, you can protect your loved ones from fraud and ensure your gift is used as intended. Gift cards should bring joy, not frustration, so stay alert, and spread the holiday cheer safely!