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Giving Gift Cards This Year? Beware These Scams

If you're giving gift cards this holiday season, watch out for these high-tech online scams and low-brow tricks to avoid being dealt a bad card
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Seven in 10 people plan on purchasing at least one gift card this season, an end-of-year-surge that will bring sales of the most-convenient of presents to more than $131 billion for the year, according to the National Retail Federation.

But shoppers aren’t the only ones interested in gift cards -- thieves are also cashing in on the trend with a variety of sophisticated scams that can drain your gift card before you’ve even bought it.

No longer considered the last refuge of the holiday procrastinator, gift cards now extend far beyond favorite department stores or restaurants. Today, you can tailor your gift card to the recipient, with options that include purchasing wine or men’s underpants, even paying a cell phone bill or donating to charity. Retailers such as American Eagle, JC Penney, and Sephora also offer the option of recording your own video to accompany the gift.

But as the variety and personalization of gift cards have grown, so have the scams.

“The good news is that gift cards have gotten safer and less tricky,” said Matt Schulz, senior industry analyst at “About three-fourths of them come with some sort of theft or loss protection, and many even come with a security code. That doesn’t mean they’re perfect, though.”

From high-tech online scams to low-brow thievery, here’s our guide to avoid being dealt a bad card:

Don’t buy gift cards from display racks

For this scam, card sharks simply grab a stack of cards from the carousel or display rack, scan the magnetic chip codes using a card reader (readily available online), then slide the cards back on the rack. The scammer then monitors the merchant’s website to see when the card is activated and goes on a shopping spree or cashes out the card on a gift card trading site.

Examine packaging for signs of tampering

Thieves can open up card sleeves and copy down the numbers, or scratch off the PIN and affix their own fake PIN code and scratch-off patch. Scammers have also been known to replace packaged cards with used cards: Once the gift card is sold and activated, the buyer has the worthless card and the scammer has the brand new one.

Watch the cashier

An unscrupulous cashier may swap a card you hand over to activate and give you back a blank card. To confirm its value, always ask for the card to be scanned after activation.

Use the gift card as soon as possible

The longer a gift card is active, the longer a scammer has to hack it and drain it. Treat gift cards like cash – use it before you lose it!

Register the card

If you are not going to use it right away, some retailers and issuers allow you to register gift cards online in order to prevent theft or misuse.

Keep your receipt

If you do find that your gift card has a zero balance, go back to the store where it was purchased and request a refund. Not only can most retailers track where the card was activated and used, but chances are that yours wasn’t the only one stolen from their store, so there may be a paper trail that would aid your case.

Store your card electronically

If you received a card, download a gift-card-management app such as slide or gowallet. These sites allow you to digitally store all your cards, making them less likely to get lost and easier to use.

Send an e-gift card instead

An electronic gift card goes straight from the merchant’s website to you or to the recipient, which eliminates any chance of tampering in a store.