With Christmas just around the corner, more shoppers are turning to gift cards as an option for last-minute gifts, stocking stuffers, and that “hard-to-buy-for” person in every family.

Since more people are turning to gift cards, it’s no wonder that this industry is experiencing accelerated growth. According to Research and Markets, the Gift Card Market in the United States is expected to reach $170.78 billion in 2021 and $238.97 billion by 2025. However, consumers don’t seem to be the only ones that love gift cards – scammers are swiping money off cards as soon as they’re taken off the rack.

How the Scam Works

The scam artist takes cards off the rack, writes down the gift cards’ numbers and scratches off the strip on the back to reveal the security code. The scammer then puts a replacement strip back over the security code, puts the card back on the rack and leaves the store. Once the customer buys the card, the scammer uses the number online and wipes the gift card clean before the customer even has a chance to use it.

Although gift card issuers are increasing their security that flags suspicious activity during purchase and redemption, consumers can still take additional steps to protect themselves. Here are some tips when purchasing a gift card this season.

  1. Examine the Gift Card. Before purchasing a gift card, be sure to give it a thorough look to make sure the PIN number isn’t exposed, or the packaging hasn’t been tampered with. If anything looks suspicious it’s best to grab a new one. Scammers are impatient and will usually put the gift card toward the front of the rack, so it’s best to grab a card from the back.
  2. Do Your Research. It’s best to double check the terms and conditions, the expiration date or any fees tied to the gift card before you decide to purchase one. Some stores charge service or setup fees, or limit the gift card to in store only, meaning you can’t use it online. Some states have laws relevant to gift cards; you can check with the office of the Attorney General in your state for more information.
  3. Register Your Gift Card. If the retailer allows the option to register your gift card, take full advantage. Registering your gift card makes it easier to keep track of any misuse occurring, that way you can report it sooner and potentially end up saving the money that is stored.
  4. Treat it Like Cash. If you lose your gift card or someone steals it, it’s best to report it to the issuer immediately. Some issuers may not allow you to recover any of the funds, and some will, but for a fee.
  5. You may need to show proof of purchase and the ID number on the card.
  6. Be Cautious When Checking Balances. BBB Scam Tracker has received reports about sites that claim to help you check the balance on your gift card, however the site steals your balance. If you need to check a gift card balance, go to the site listed on the back of the card itself or, if there is none, go to the website of the company and look for a link to the gift card page.
  7. Use Caution When Buying from a Third Party. If you purchase a gift card at an auction or on a third-party website you may end up with a gift card that has no value, is expired, or was fraudulently obtained. The seller could sell you a gift card that does indeed have the actual balance on it but steal the numbers and start wiping the gift card clean after you receive it.
  8. Don’t Pay Using a Gift Card. No reputable company would ask for payment via a gift card. If you receive a call demanding you must pay using a gift card, just hang up. Scammers use scare tactics by threatening you with jail time unless you pay them immediately with a gift card. These scare tactics are nothing but just a tactic to get your hard-earned money.
  9. Consider the Financial Condition of the Retailer. If you purchase a gift card from a company that files for bankruptcy or goes out of business, the card may be worth less than you had anticipated. If you feel like the company is on shaky ground, it may be best to purchase a gift card from another retailer instead.
  10. Keep Your Information Private. No reputable business would ever ask you for personal information when purchasing a gift card. If they do, take that as a big red flag and purchase one elsewhere.
  11. Use Caution When Selling Online. If you decide to place your gift card online, use caution. A scammer posing as the buyer will ask to do a three-way call with the merchant to verify the card is active and has a remaining balance. While listening, the buyer records the touch tone numbers entered to intercept the gift card number, and then they use the gift card without even paying for it. If someone asks to listen to your balance inquiry or wants to look over your shoulder while you enter the numbers, it is most likely a scam.

Once you’ve purchased a gift card, here are some federal rules governing the sale and redemption of gift cards and consumer guidelines designed to help you and your gift card recipient have the best possible experience.

  • Gift card sales and redemption are governed by Federal regulations.
  • An inactivity fee cannot be charged until the card has not been used for 12 months.
  • Gift cards cannot expire for at least 5 years.
  • No more than one fee (of any kind) can be charged to the cardholder in a single month.
  • Information printed on the card must disclose fees and an expiration date and provide a toll-free phone number or website where you can get more information.
  • A one-time fee can be charged when you buy the card, though this generally only applies to gift cards purchased through your credit card company – not those purchased directly from stores and restaurants.
  • If a third-party gift card seller violates any of these rules, contact the BBB and file a report with the FTC.

Sources: BBB.org, Markets and Research, and the FTC – Source: United States Federal Trade Commission, www.ftc.gov – not subject to copyright protection. 17 U.S.C. 403.

For more details about the Markets and Research study cited in this article, check out the United States Gift Card and Incentive Card Market Intelligence and Future Growth Dynamics (Databook) – Market Size and Forecast (2016-2025) – Q2 2021 Update.

To report a scam, call your local BBB or go to BBB Scam Tracker. To find trustworthy businesses, visit bbb.org.