Don’t Fall for the Gift Card Scam
The gift card scam has become a big business, especially during the holiday season, when many people are thinking of giving gift cards family members and friends. After all, a gift card enables the recipient to get whatever gift desired, while it saves the buyer from having to find a gift, wrap it up, and send it, without knowing if it’s what the recipient really wants. So it seems like the perfect solution for gift giving, and hundreds of retailers offer these cards.
Well, think again, because you could easily get defrauded in what has become a big scam industry. In the first 9 months of 2021, 40,000 consumers who filed complaints with the Federal Trade Commission about gift card payment scams lost $148 million, according to an AARP article on “Gift Card Scams.” And that loss is just for reported scams to the FTC. Certainly, the amount of fraud is much more, since the majority of fraud incidents are not reported to the government, according to the FTC.
While many of these scams involve a few hundred dollars or less from a single gift card, some victims have lost thousands of dollars, and the median amount lost to gift scammers was $1000, according to a December 9, 2021 Forbes article by Lisa Rowan: “Gift Card Scams Spiked in 2021. Here’s How to Avoid Getting Duped.” Moreover, the problem is much larger than officially reported, since less than 5% of gift card scam victims report the crime. And the amount scammed can over $5000 — even as much as $20,000 or more — for some victims, who have fallen for scammers telling them they need to buy many gift cards right away because of some emergency, such as their credit card being hacked, so they have to buy gift cards before their balance is wiped clean.
Some Examples of Scam Victims
That’s what happened to one retired 75-year-old man in Arkansas, who spent $35,000 on gift cards in three days by buying 70 gift cards worth $500 each from six retailers — Lowe’s, Walmart, Sephora, Best Buy, Sam’s Club, and Target, according to a January 13, 2020 article on AARP by Katherine Skiba: “3 Harrowing Days: Fraudsters Rip Off Retiree for $35,000 in Gift Cards.” In this case, “John” had been given a gift card, and on the last day to redeem it, he received a pop-up alert, supposedly from Microsoft, claiming that his computer had been hacked. At the same time, a ringing alarm went off. But instead of turning off his computer, John called the phone number on his computer screen, which went directly to the scammer, who said he was from Microsoft and explained that John’s email had been hacked and his Visa card was compromised.
After the fraudster made a three-way call, supposedly to John’s Visa account manager at the Chase bank, the call looked like the real thing, since Chase’s phone number appeared on John’s caller ID. Then, a second scammer with a South Asian accent, claimed John’s card had been used for $15,000 in charges in South Korea and Dubai, so the only way he could stop the charges from going through or his card being used for other fraudulent charges was to max out the card to its $25,000 limit. To do so, he should buy gift cards for that amount, and Chase would send him a replacement card.
So that began John’s spending spree, as he drove from store to store to buy gift cards, and after he exhausted that credit card, the fraudsters got him to buy even more gift cards to cash out his Discover card, which supposedly had been compromised, too, leading him to spend another $10,000 on cards. Unfortunately, the scammers quickly drained his gift cards, because, as they requested, he gave them the gift card numbers and PINs, so they were able to redeem the cards at a chain of Walmart stores in Louisiana, Mississippi, Texas, and Virginia. Plus, they used Walmart Pay, an app that can be used to pay by entering gift card numbers on a mobile phone. After the scammers took the money, the cards became worthless for John. Even the detectives pursuing his case couldn’t get back his money.
I didn’t realize the extent of this scam myself, until I spoke on the phone with a long-ago acquaintance from high school who I first re-connected with about a year ago. As we shared our annual updates, my friend, now living in Maryland, told me of two incidents where her relatives had been sucked into a gift card scam. What surprised her is that both individuals, who were professionals with college degrees, would fall for this, which shows how convincing scammers can be. In one case, her sister’s daughter was asked to buy a gift card for a friend who couldn’t purchase it because of problems with her credit card, and later the friend would repay her. So the daughter paid $50 for the card, only to later discover her friend knew nothing about this purchase. In the other case, another relative spent $250 for a card, because the caller claimed her friend was traveling outside of the country and needed the money to get a return flight, since she had trouble using her credit card to do this. But later, the relative learned her friend hadn’t been out of the country at all.
After hearing this story, I began researching gift card scams and learned how pervasive and costly they are. Generally, the scammers are just after money, but as with many scams, they may seek personal identity information, too, which they can use to commit other scams and hack your computer, or they can sell your personal information on the Dark Web.
How and Why These Scams Work
The basic scam involves getting you to buy a gift card and give the scammer the card number and PIN, so they can use the card, or they tamper with the card, so they already take the money, before you buy it.
These scams have become very popular for several reasons, according to a December 7, 2021 article by Phil Muncaster on WeLiveSecurity.com, “5 Common Gift Card Scams and How to Spot Them,”
- Consumers can easily buy the cards online or in a store.
- Most retailers and big-name brands offer some type of gift card.
- A buyer has fewer protections than if using a credit or debit card.
- The cards are like using cash, until the balance on the card is gone.
- The scammer only needs the gift card number and PIN to get the money.
Scammers can even steal huge numbers of cards from the retailers who sell them. As Muncaster reports, one scammer stole 900,000 cards valued at $38 million from an online discount card shop Cardpool, and these cards could be used for thousands of brands, including Amazon, American Airlines, AirBnB, Marriott, Nike, Target, and Walmart. Then, the scammer tried to sell the cards on a Dark Web site.
In other cases, scammers can steal money from a gift card by tampering with the card to get the number and PIN. Then, they use the money on the card before it even leaves the store. That’s why about 21% of consumers reported they gave or received a gift card which had no money on it, according to an AARP study of adult consumers, as reported by Susan Tompor in a September 12, 2021 Detroit Free Press article: “How to Avoid Gift Card Scams: What to Check before you Buy.” Some scammers don’t even have to physically tamper with the cards to take money. Instead, they can use technology to know when a card is purchased by a consumer and activated. Then, once the consumer loads the money onto the card, the scammers can steal the money by using the activation code.
Major Ploys to Get You to Buy a Card
Here are some of the major ploys to get you to buy a card, using email, a text message, or a phone call. Generally, the scammers not only require you to pay with a gift card, but they may specify which type of card to use in paying them, such as getting a card from Target, Google Play, Apple, Walmart, and eBay. But just asking you to pay by a gift card should be a red flag, because no legitimate business or government agency will ask for a gift card payment, according to the FTC. The major ploys included these:
- A scammer claims to be an official from the government, a utility company, or other organization and claims you need to act quickly to pay a bill or taxes, lest you be subject to some terrible result, such losing your electricity, lease, or house.
- A scammer claims to be from Amazon, Apple, or a major retailer claiming there is a security problem with your account, and to fix it, you have to buy gift cards and send the person who has called, emailed, or texted you pictures of the back of the cards.
- A scammer claims to be a relative, friend, or employer and asks you to buy gift cards for them, giving you a seemingly valid reason, such as being stuck in meetings or out of town, and now urgently needs to get something for a client or a special event they will be attending.
- A scammer uses an automated bot to obtain data on card balances and card numbers from the IT system used by retailers and other organizations. Then, the scammer or others who buy this data can use the card like the real cardholder — a method which has become a big bonanza for scammers, since in the U.S. alone, unused gift cards and credits are worth as much as $15 billion.
- Scammers go to stores that sell gift cards and steal the card numbers and pins. Often the scammers can do this by taking off the film strip concealing this information and placing their own stickers on the cards. If the cards are in boxes, the scammers may open up the boxes, get the information from the cards, and seal the boxes up again. Sometimes these gift cards are already preloaded with a certain amount; in other cases, a scammer may wait until the buyer loads funds onto the card to take the money.
- A scammer may claim you won a prize, but to get it, you have a pay a fee using a gift card. This approach is akin to the scam where you pay a fee via a wire transfer, Western Union, or Moneygram.
- A scammer offers you a large gift card as a prize, but to obtain it, you have to provide some personal information, which may include your bank account, presumably to pay you money from the gift card. But later you not only don’t get the money, but the scammer can sell your personal information on the Dark Web.
- Once you agree to get a gift card, the scammer may ask you to make several purchases at different stores, and some scammers will keep a victim on the phone while they go from store to store. Commonly, they will ask for the gift card number and security code with each purchase, enabling them to access those funds right away.
- The scammer will often use a spoofed phone number that appears to legitimately belong to a particular organization, which shows up on your caller ID. Or a scammer appears to have an email from a real company they claim to represent, but if you look closely, the email may have an extra letter, hyphen, or use slightly different words or lettering, such as turning “apple.com” into “theapple.com” or “applestore.ca.”
- The scammer may claim to be a relative or friend in distress, so they need money right away to get them out of their mess, and you have no time to call to check with the relative or friend if this is true. A variation on this scheme is claiming that they, as your relative or friend, need a loan
- The scammer may offer goods at a discount on a resale or auction website, and if you want to buy, they ask you to pay with a gift card. But after they get the card’s number and PIN, they are gone and so is your money.
- A person selling an item online asks to be paid with a gift card from another retailer.
- A scammer may pose as the member of the clergy or part of a non-profit organization seeking money for a worthy cause. Then, they reach out to members of the congregation or organization asking them to buy gift cards and tell them the numbers.
- The scammer may give you still other reasons to buy one or more gift cards and give them the numbers rather than you paying in some other way.
How to Avoid Becoming a Gift Card Scam Victim
There are several ways to avoid becoming a victim of these scams.
- Don’t fall for any of the ploys described above, when someone contacts you for any number of reasons and asks you to buy one or more gift cards.
- Be suspicious if anyone asks you to buy a gift card to make a purchase rather than paying with a check, credit card, debit card, or established pay platform, such as PayPal or Stripe.
- Buy gift cards which you plan to use yourself or give as gifts from reputable stores and online retailers, and preferably order them online, since scammers can tamper with cards on store racks.
- Check that a gift card you purchase in a retail store hasn’t been tampered with, such as if the protective strip covering the card number and PIN has been removed and replaced or if the box containing the card has been opened and resealed. Or sometimes the PIN number may be exposed.
- Never give the numbers on the back of a gift card to someone you don’t know, since once you tell scammers these numbers, they can quickly spend the money before you can contact the card issuer or law enforcement.
- Recognize that certain gift cards, such as from Apple, Google Play, or Amazon, can only be used to purchase items from those companies; so if someone asks you to use one of these cards for something else, it’s a scam.
- If you think you have used a gift card to pay a suspected scammer, immediately contact the retailer, since you might be able to get back any money left on the card.
- Register your card with a retailer who offers that option, since it is easier to track such cards and quickly report any problems.
- Don’t respond if you get an offer for a gift card from unsolicited email or text message.
- Don’t buy a gift card from an online auction site, since often such cards are counterfeit or stolen.
- Don’t give your personal information to anyone giving you a gift card.
- Don’t pay for fees, taxes, or bills with a gift card, should you receive such a request from a person claiming to be from a government agency, utility, tech company, or other business. The request is almost certainly a scam, since these organizations don’t ask you to pay with a gift card.
What to Do If You or Someone You Know Becomes a Victim or Doesn’t Fall for a Scam
Besides keeping the receipt of your purchase which has identifying information about the gift card, report the scam. If you are a victim, you may not be able to get back your money, since paying with a gift card is like paying cash, but your information may help to shut down the scam or lead to prosecution of the scammer, if there are enough reports of the fraud. If a scammer approaches you, but you avoid becoming a victim, you can still report the attempt which might help law enforcement go after the scammers. Here are some ways to report what happened.
- Report the scam to the retailer who issued the gift card.
- Contact your local police and file a police report, which might lead to your getting some help from whoever issued the gift card.
- Report the fraud to the Federal Trade Commission (www.ftc.gov) with as much detail as you can, such as when and where you purchased the card, the scammer’s phone numbers or email addresses, and screenshots of what the scammer said in an email or text message. Though the FTC can’t handle individual cases, it can investigate as the complaints against a scammer mount up, and it can share its scam reports with other law enforcement agencies that handle such cases.
- Report the scam to your state attorney general, who can investigate when there are multiple frauds.
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The author is internationally published author and film producer, Gini Graham Scott, PhD, who has published over 200 books, 50 for traditional publishers and 150 for her own company Changemakers Publishing, specializing in books on self-help, popular business, and social issues. She is the author of The Big Con: Scams Targeting Writers, the Victims, and How to Avoid Becoming a Victim and I Was Scammed about all types of scams and how to avoid them. She has written and executive produced 18 feature films and documentaries, featured on the www.changemakersproductionsfilms.com website. An inspiration for this article is that Changemakers Productions is now raising money for its first horror film Dark Cabin, which features 6 friends on a vacation up against Viking ghosts. It’s filming in the New York area in February 2022, and other horror films are planned. She also writes books and scripts for clients. Her website for writing is at www.changemakerspublishingandwriting.com.
For more information or to set up an interview, contact:
Executive Assistant to Gini Graham Scott
Changemakers Publishing and Writing
Lafayette, CA 94549 . (925) 385–0608