How to Beat the $80mil Gift Card Scam

This is an article published by Scambusters(.org). Be sure to talk to those in your family and circle of friends who may be susceptible to a scam.

Hundreds of millions of dollars have been lost during the past few years to gift card scams.

The worst of it is that the scam is so patently obvious. If you’re asked to pay with a gift card for anything at all — a product, a fine, a service, a bill, taxes, and so on — it’s almost certainly a scam.

Yet people still fall for this trick. According to AARP, the organization representing older folk, around one in 10 Americans have already fallen for it and an even bigger number — as many as one in three people — say they’ve been asked or know someone who has.

The crime has topped the list of fraudulent payment methods in every one of the past three years, costing victims an estimated $80 million per year. The average loss was $700, with over-65s being the most vulnerable, although losses running into thousands or even tens of thousands of dollars are not uncommon.

The way the scam operates is simple. Victims are told to buy cards for a specified amount to cover an invented payment claim and to phone or email the numbers on the cards or text a photo of them to the scammer. These are then used for purchases or sold for cash, with the spender usually being untraceable.

The situation is getting so much worse that, at the end of last year, the US Federal Trade Commission announced a new campaign to partner with retailers to help alert customers who buy cards to the possibility of a scam.

Also, the Better Business Bureau (BBB) recently completed an in-depth study of gift card scams and has called on card providers to print scam warnings on the cards themselves, as well as flashing a warning on screens at cashier stations.

Other ideas include limiting the number of cards that can be bought at one time and imposing time restrictions, whereby cards can’t actually be used for a short period after they’ve been bought.

How You Can Avoid a Gift Card Scam

“If you’re asked to make payment via gift card for whatever reason, you almost certainly are dealing with a scam,” says BBB’s Michelle L. Corey. “Gift cards don’t carry the same protections as credit or debit cards, so funds spent on gift cards are funds you cannot get back.”

In particular, crooks often pose as government officials and demand payment for overdue taxes, Social Security errors or other official business. But the US government never, but never, requests money to be paid by gift card.

In addition, look out for the following warning signs:

  • The request for payment includes some kind of statement to the effect that it’s the “safe way to pay.” It isn’t.
  • The scam caller tries to pressure you by saying payment is urgent and that is why they want you to use gift cards.
  • The caller specifies where to buy the cards, usually for big-name stores like Walmart or Amazon.
  • A caller you meet on a dating site spins a story about needing money or a particular item and suggests a gift card from you will be the best way to get it.
  • You receive a check, followed by a request to refund part of it urgently using a gift card.

Another Gift Card Scam

Remember also, as we’ve warned previously, that crooks operate another gift card scam in which they read off card numbers on store racks, then disguise the cards so buyers can’t tell.

However, these days, many card providers and retailers now have safety processes in place to avoid this type of scam. Even so, it’s always worth checking a card and the packaging to ensure neither has been tampered with.

When you buy a card, always keep the receipt as proof both of purchase and activation. And if you do fall victim to a gift card scam, notify police, the place where you bought it, and one of the consumer groups like BBB, FTC, or the FBI’s Internet Crime Complaints Center (IC3). Find them online.

Learn more and how to contact the likes of Amazon and Walmart here:

Finally, here’s one short and simple rule to remember and to pass on to others that will almost certainly help you or them skip a scam: Gift cards are for gifts, not payments.