Good day to all Global Team Members.

As part of this month’s Continuing Privacy and Security Training (“CPST”), the Compliance Team wanted to describe “What is Gift Card Scam?”

What Gift Card Scams Look Like

Gift cards are for gifts, not for payments. But they’re popular with scammers because they’re easy for people to find and buy, and they have fewer protections for buyers compared to some other payment options. They’re more like cash: once you use the card, the money on it is gone. Scammers like this.

If someone calls you and demands that you pay them with gift cards, you can bet that a scammer is behind that call. Once they have the gift card number and the PIN, they have your money. Scammers may tell you many stories to get you to pay them with gift cards, but this is what usually happens:

  1. The caller says it’s urgent. The scammer says you have to pay right away or something terrible will happen. But you don’t, and it won’t.
  2. The caller usually tells you which gift card to buy. They might say to put money on an eBay, Google Play, Target, or iTunes gift card. They might send you to a specific store — often Walmart, Target, CVS, or Walgreens. Sometimes they say to buy cards at several stores, so cashiers won’t get suspicious. And, the caller might stay on the phone with you while you go to the store and load money onto the card. These are all signs of a scam.
  3. The caller asks you for the gift card number and PIN. The card number and PIN on the back of the card let the scammer get the money you loaded onto the card. And the scammer gets it right away.
  4. Scammers pretend to be someone they’re not to convince you to pay with gift cards. They want to scare or pressure you into acting quickly, so you don’t have time to think or talk to someone you trust. Here’s a list of common gift card scams and schemes.
  5. The caller says they’re from the government — maybe the IRS or the Social Security Administration. They say you have to pay taxes or a fine, but it’s a scam.
  6. Someone calls from tech support, maybe saying they’re from Apple or Microsoft, saying there’s something wrong with your computer. But it’s a lie.
  7. The scammer pretends to be a friend or family member in an emergency and asks you to send money right away — but not tell anyone. This is a scam. If you’re worried, hang up and call your friend or relative to check that everything is all right.
  8. Someone says you’ve won a prize but first, you have to pay fees or other charges with a gift card. Remember: no honest business or agency will ever make you pay with a gift card. But also — did you even enter that sweepstakes?
  9. The caller says she’s from your power company, or another utility company. She threatens to cut off your service if you don’t pay immediately. But utility companies don’t work that way. It’s a scam.
  10. You get a check from someone for way more than you expected. They tell you to deposit the check, then give them the difference on a gift card. But that check will be fake and you’ll be out all that money.

Various types of gift card fraud schemes

1. BOT Steals the Gift Card Balance

HOW THE SCAM WORKS: Hackers use a bot called GiftGhostBot to run through a store’s online gift card balance check system looking for a match–meaning a valid gift card number with an activated balance. Once the bot finds a match, hackers use the gift card themselves or sell it on the “dark web.

RED FLAG: If you notice the balance of your gift card is gone, then contact the gift card issuer immediately.

WHAT TO DO: The best way to avoid this gift card scam is to simply use gift cards soon after you receive them, leaving little opportunity for a bot to find your gift card in the system. I also suggest checking your unused gift card balances often. An easy way to do this is to load your plastic and egift cards into a gift card app or your smartphone’s mobile wallet, both of which allow you to perform an automated balance inquiry. Lastly, if you have an unwanted gift card–one that you are not likely to use–then sell it for cash. People who buy discount gift cards are often planning to use them quickly so that is another way to ensure gift cards are used by their rightful owners.

2. Stolen Card Number

HOW THE SCAM WORKS: In this scam, a thief removes a gift card from a display, records the number and then puts the gift card back in the display. Then the scammer waits for a customer to buy the compromised gift card, checking the balance online until a dollar amount is loaded onto the card. As soon as a balance appears, the thief uses the gift card number online or makes a duplicate plastic gift card that can be used in stores. This gift card scam works best when there is a controlled number of gift cards available such as a small merchant with a stack of 10 gift cards on the counter. At a larger store, the gift cards near the cash register or on the ends of the rack would most likely be the ones affected.

RED FLAG: If someone tries to get you to purchase a particular gift card, it could be a scam. Pick a gift card from the middle of the rack or from a less-frequented area of the store.

WHAT TO DO: Since impatient thieves will put the gift cards they swiped back on the front of the rack, select gift cards that are less accessible. At a grocery store gift card kiosk, for example, you might select a card hanging in the middle position on one of the pegs rather than those that are hanging in the first position. In other words, don’t be lured by the most obvious gift card on the rack.

3. Tampered Packaging

HOW THE SCAM WORKS: To protect consumers from the swiped gift card fraud described above, some gift card manufacturers have added special packaging or scratch-off personal identification numbers (PINs) to their cards to prevent thieves from being able to simply look at the cards to steal the gift card numbers. Though a deterrent, the packaging and PINs haven’t fully stopped scammers. Some thieves will still take the packaged cards, open them to get the numbers, and then tidy the envelope back up in hopes no one will notice. Some also scratch off the PIN and re-cover it with a sticker or just leave it entirely exposed. Once the scammer has access to the gift card number, he or she will use it as soon as an unsuspecting customer activates the card.

RED FLAG: If the packaging looks tampered with in any way, it could be a scam. Check to see what other gift cards look like, inspecting the seams, PIN’s and anything else that could be amiss.

WHAT TO DO: When buying a gift card, carefully check the packaging or PIN label. Don’t just look for the obvious dismantling of a card, however. Scammers work hard to be discreet, using razor blades to separate the envelopes or scratch the PIN labels off with care. If the card looks tampered with in any way, turn it into the cashier and buy a different gift card.

4. Switched at Checkout

HOW THE SCAM WORKS: This gift card scam only works when a store employee is part of the plan. As the customer hands a gift card to the cashier for activation, the cashier activates a different card and hands the original back to the customer. (Or the opposite is true. The cashier activates the first card, but hands an inactive card to the customer.) In either case, the cashier racks up activated gift cards while handing out blanks.

RED FLAG: If the employee acts distracted or tries to distract you during gift card activation, it could be a scam. If the gift card number doesn’t match the number on the activation receipt, this is also a problem.

WHAT TO DO: Keep your eye on the gift card at all times and ask to have it handed back to you as soon as the card is activated. Check the gift card number listed on the activation receipt to ensure it matches the number on the card you just received as well.

5. Discount Double-Dip

HOW THE SCAM WORKS: There is a profitable gift card reseller market that consumers can use to sell their unwanted gift cards for cash or buy other gift cards for less than face value. To shorten the time between buying and selling these gift cards (and to eliminate the need to ship the physical plastics), many online resellers accept gift codes–the numbers on the cards–rather than require sellers to mail in their plastic gift cards before getting payment. Scammers sometimes try to sell their codes for cash, then quickly use the cards after the company confirms the balance and accepts the card. In some cases, the reseller will discover the fraud. In other cases, the person buying the discount gift card is the one who figures it out.

RED FLAG: If you purchase a discount gift card and find the balance is less than expected, it could be a scam

WHAT TO DO: Only buy discount gift cards from resellers that provide a guarantee. While you may be able to get a bigger discount on a gift card sold via an individual using an online auction site or a “friend of a friend,” you also run the risk of losing your money entirely if the seller has nefarious plans in place.

6. Fake Gift Card Activation

HOW THE SCAM WORKS: When you receive a gift card that needs to be activated, there is generally an activation website address and telephone number listed on the back of the card and possibly on a sticker across the front as well. Before you can use the gift card, you have to go to the activation website and enter the gift card number, expiration date, and card verification code (CVC). Gift card scammers create fake websites with similar web addresses in hopes that victims will land on these fraud sites instead of the real activation site. In addition to catching people who simply mistype the web address, they lure others to the fraud sites by bidding on the activation site keywords to ensure the fraud websites appear at the top of search engine results. When someone enters their card information into the fake website, scammers take the card information, activate it themselves on the correct website and drain the value of the gift cards.

RED FLAG: While it may be difficult to detect a fraudulent activation site simply by looking at it, most do have a less professional appearance than the real site. Additionally, you may find misspellings and references to legitimate gift card issuers, but the most telling clue is that the website address at the top of the page does not match the address listed on the card.

WHAT TO DO: This scam only works if you search for the activation site instead of typing it in yourself. Yes, I know it’s a pain to type the website address, but it’s the only way to guarantee landing on the correct site. If the print on the back of the gift card is too small to read, get a magnifying glass or use your mobile device to enlarge the print. You can also call the phone number instead of using the online activation. Once you find the correct site, you can bookmark it for future gift card balance checks.

Do’s and Don’ts

Do’s Don’ts
Do purchase cards you plan to use yourself or give as presents directly from the business that issued them, preferably by ordering them online. Cards on store racks can be tampered with. Don’t give gift-card information to callers claiming to be from government agencies, tech companies, utilities or other businesses. Only scammers ask you to pay fees, back taxes or bills for services with gift cards.
Do carefully examine any card you are considering buying at a physical store for signs 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. Don’t respond to an unsolicited email or text message offering you a gift card. Delete it.
Do immediately contact the retailer that issued a gift card you used to pay a suspected scammer. If money remains on the card, you might be able to get it back. You often will find contact information on the card. Don’t give personal information to anyone in exchange for a gift card. Don’t buy the top gift card right off a store rack. That’s where impatient scammers usually put doctored cards, according to the Better Business Bureau.
Do register your card with the retailer if that option is offered. This makes it easier to track and quickly report any issue Don’t buy gift cards from online auction sites. They could be counterfeit or stolen, according to the FTC.

How to prevent being scammed

  • Buy gift cards from sources you know and trust and avoid buying gift cards from online auction sites, because these cards may be counterfeit or stolen.
  • Inspect a gift card before you buy it. Check that none of the protective stickers have been removed. Make sure that the codes on the back of the card haven’t been scratched off to show the PIN number. Report any damaged cards to the store selling the cards.
  • Keep the receipt with the gift card. Whether you’re giving or getting, try to keep the original purchase receipt, or the card’s ID number, with the gift card.
  • Use the card as soon as you can. It’s not unusual to misplace gift cards or forget you have them. Using them early will help you get the full value.

What to do if you are a victim

If you paid a scammer with a gift card, tell the company that issued the card right away. Ask them if they can refund your money. If you act quickly enough, the company might be able to get your money back. Some card issuers use cybersecurity defense systems, and they may be able to distinguish between honest and fraudulent transactions on your gift card. So if your card has been drained, call the issuer and ask for reimbursement. You might need to show the receipt and the ID number on the card. Most issuers have toll-free telephone numbers you can call to report a lost or stolen card.