Thanks to gift card scams, it’s beginning to look a lot more shady this holiday season

By Malavika Pradeep

Updated Dec 5, 2022 at 02:49 PM

Reading time: 6 minutes

It’s that time of the year again when Google witnesses a surge in traffic for the search term ‘last-minute Christmas gifts’. While some of us started sourcing our Christmas presents the morning after Halloween, last-minute gifters are a different breed—navigating present guides and summoning their last three brain cells to remember whose name they landed for secret Santa at work mere hours before the exchange.

With procrastination comes a plethora of life-saving options including candles, hampers, bouquets, subscription boxes… and the infamous gift cards—along with all their blaring red flags that are virtually impossible to trace, making it a scammer’s love language.

The rise and rise of gift cards

Ever since their large-scale introduction by luxury retailer Neiman Marcus in late 1994, gift cards (also known as gift certificates, gift vouchers, and gift tokens) have had a toxic affair with the holiday season.

Once considered as little plastic bundles of joy, gift cards evolved into a safe and versatile option to hand to all the ‘it girls’ in your life. Later subjected to cringe culture, they are now witnessing a revival as inflation and the cost of living crisis continue to wreak havoc on holiday budgets—in turn, subjecting consumers to a complete reevaluation of priorities close to Christmas.

According to research from National Retail Federation (NRF) and Prosper Insights & Analytics, gift cards are the preferred medium of presents this Christmas for the 16th year in a row. As noted by Jay Jaffin, Global Chief Marketing Officer for Blackhawk Network, consumers are also predicted to purchase an average of 36 gift cards—both physical and digital—during the holiday season.

“That number might sound big, but think about the things we do over the holidays,” Jaffin said in an interview with PaymentsJournal. “You might buy your kid’s teachers each a $20 gift card. There are all the people we interact with on a day-to-day basis that we want to show a small token of appreciation to.”

As per data collected by Blackhawk Network, gift card spending represents about half of the total holiday budget—with 58 per cent of consumers planning to change their shopping behaviour altogether, seeking to use more discounts and promotions. It’s also worth noting that gen Zers, in particular, are hoping to increase their gift card spending by 57 per cent in 2022, from $185 to $290.

The virtual Grinch that keeps on grinching

Today, gift cards have evolved into a huge global market projected to hit a whopping $2 trillion by 2027. It’s therefore safe to say that last-minute gifters love them, retailers adore them… and scammers worldwide swindle the heck out of them.

The boom of gift cards hasn’t escaped the notice of cybercriminals and online fraudsters, who have developed a whole underground industry focused on the plastic present. In the first nine months of 2021, nearly 40,000 consumers reported losing $148 million in gift card scams. What’s worse is that this number may be a mere fraction of the problem as less than 5 per cent of gift card scam victims actually report the crime.

Now, if you’ve experienced any sort of scams in the past, you’ll know how helpless the entire ordeal makes you feel. While you regret losing your hard-earned cash, others will typically blame you for falling for dodgy schemes. And the worst part about it all is that the scam sounds stupider every single time you explain it to someone.

At the end of the day, you’re eventually forced to “move on” and “learn from your mistakes” while dousing yourself in self-doubt whenever an unknown number pops up on your phone screen. But don’t worry just yet. This holiday season, I’ve got you covered in the gift card end of things. From a shocking range of tactics deployed by fraudsters to reporting scams to the right authorities, here’s everything you need to know about the tiny plastic cards that are here to stay for the foreseeable future:

1. Why do scammers love gift cards?

Gift cards are essentially popular among fraudsters for the same reason why they’re popular among consumers: they’re a near-ubiquitous store of money that can be used to buy a huge range of goods and services.

More specifically, scammers love gift cards given the fact that they’re easy for consumers to purchase, both online and in-store. Most retailers and big-name brands now offer some form of gift card and there are fewer protections in this case than if the buyers were using regular payment cards. Just like cash, once the balance on the card is gone, it’s gone. Lastly, there’s no need for a scammer to provide a bank account for payment here—instead, they just need the gift card PIN or code.

According to the Federal Trade Commission (FTC), gift card scams often feature one retailer (drum roll, please): Target.

The agency noted that Target gift cards were reported twice as much as any other gift card brand. 30 per cent of people who obtained these cards for a scammer also said that they’ve lost $5,000 or more.

“Unfortunately, gift card scams are a persistent issue across the retail industry,” Target said in its statement. “Target takes these crimes extremely seriously and we use a multi-layered, comprehensive approach to mitigate fraud that includes technology, team member training, and collaboration with law enforcement.”

2. How are gift card scams carried out?

Though scammers can be tricky and pretty persuasive, here are some tactics and warning signs you should keep an eye out for:

The cheugy method

One of the most basic tricks in the book is when thieves go to physical stores and scratch off the film strip on the back of gift cards to get the PIN—which they cover back up with easy-to-obtain replacement stickers.

The scammer then enters the card numbers and PINs into a computer program that repeatedly checks the retailer’s website and lets them know when someone buys and loads a compromised card. The crooks can then spend or transfer the money on the card, or cash it in before the buyer or gift recipient even has a chance to use it. Smooth criminal, indeed.

The phoney giveaway

In this case, you get an email or text, supposedly from a familiar store or organisation saying you’ve won a gift card. To claim it, you just need to provide contact information, click through to a website, or answer a few survey questions, often about your finances or health. Nothing sus so far, right?

Alas! The scammer then instals malware on your computer, uses your data for identity theft, or sells it to marketers—resulting in a barrage of spam emails about loan opportunities or miracle cures.

The threatening ‘government official’ who’s a sucker for gift cards

Here, scammers will masquerade as a legit government official, a representative of a company you do business with, or even a loved one in trouble. They’ll typically threaten you by claiming that you owe unpaid taxes or outstanding bill payments and stress the urgency of payment. This is classic social engineering designed to force the victims into hurrying their decision-making.

But wait, there’s a catch: the payment can only be made through gift cards—with the scammers usually specifying the type of card they want to be used for the payment. According to the FTC, no real business or government will require payment via gift card.

Bots steal your balance

Sometimes the bad guys don’t screw around and go straight to the source by hunting digitally for a record of your gift card with the issuer.

How do they do this, you ask? By using automated bots to probe bank-end IT systems at retailers and other organisations for details on card balances and card numbers. With this information, they can use the card as if they were the official cardholder.

3. How to protect yourself from gift card scams

First off, hang up on fake callers instead of entertaining them just to see “how far they would take the joke.” Believe me, as a gen Zer, you may feel like you know your way around cyberspace, but no phishing, vishing, or scam attempt is worth your bank account or your mental health. Delete all unsolicited email or text messages offering you a gift card and avoid giving personal information to anyone in exchange for the same.


Works like a charm… #fyp

♬ msnewslady Jeannette Reyes - JENNIE HUFF

Secondly, given how in-store gift cards can be easily tampered with, it’s best to purchase the ones you plan to use yourself or give as presents directly from the business that issues them. This is even more preferable if done online.

If you’re looking to buy a gift card from a physical store, make sure to look out for any sign of tampering. It’s safer to buy from places that keep gift cards behind the counter or if they’re sold on racks in well-sealed packaging.

It’s always recommended to register your card with the retailer, if that option is offered. This makes it easier to track and quickly report any issues. Lastly, immediately contact the retailer that issued the gift card if you’ve used it to pay a suspected scammer. If money remains on the card, you might just be able to get it back.

At the end of the day, remember that fraudsters all across the world are coming up with new ways to swindle your cash and personal data as we speak. So while the tips offered above don’t make a complete handbook on how to deal with scammers, it’s definitely a good place to start.

And please, for the love of Mariah Carey, don’t even think of handing a “crypto gift card” to someone this Christmas. Because chances are that even the scammers involved in the business wouldn’t be interested in swindling someone with such poor financial choices and gift-giving etiquette.

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