7 types of gift card scams: How to spot them and avoid them
June 29, 2021 2 min read
Gift card scams can start off with a phone call, email or text. Learn how fraudsters trick victims into sending them online gift cards or reading the numbers on the back of a gift card over the phone.
Ever get a voice mail or text message from an IRS agent warning that you owe taxes and that the only way you can pay them is by sending the agency an electronic gift card?
Or maybe a state trooper calls to say that you owe hundreds of dollars in speeding tickets and that the only way to remove them from your record is by phoning in the numbers from an Amazon gift card to pay off your fines.
If you do get such calls, emails or texts, ignore them. They're examples of gift card fraud, a type of con in which criminals trick victims into either sending them online gift cards or reading the numbers on the back of a gift card over the phone.
Fortunately, spotting and avoiding different types of gift card scams isn't overly complicated. Here's a look at some of the more common gift card scams and the steps you can take to avoid falling for them.
How gift card scams work
The thieves behind these scams rely on high-pressure tactics to scare people into giving away gift cards.
The Federal Trade Commission says scammers will usually call, text, or email victims and tell them they are in some sort of financial trouble. They might claim that victims haven't paid their taxes, are behind on their mortgage payments, owe hundreds of dollars in speeding tickets, or have fallen behind on their utility bills. Scammers threaten to foreclose on these victims’ homes, send them to jail, or shut off their power if they don’t pay up.
The scammers will then demand that victims purchase a gift card and either send them an electronic version of the card or provide them with the gift card's number and PIN. Once they have this information, they'll use it to buy whatever they want with the gift card, and victims will be out the money they spent on it.
7 common types of gift card scams
Scammers might try to trick you by phone, text, or email with these seven common gift card scams. Here’s how to spot the scams and avoid them.
Scam 1: Threatened by the IRS
In one of the more common gift card scams, a criminal will call you or send you a text or email message claiming to be working with the IRS. This scammer will say that you owe unpaid taxes and that the IRS will arrest you if you don’t pay now. The criminal says that you must pay the taxes you owe with a gift card.
Once you purchase gift cards — the scammer will usually request gift cards from a specific retailer — you call back the criminal and read off your gift card numbers and PINs. The scammer then uses this information to purchase items online with the gift cards you bought.
Secondly, the IRS will never threaten to send you to jail for taxes you owe.
And, finally, the IRS will never request that you pay owed taxes with a gift card.
Scam 2: Beware the bots
Gift card scammers often turn to bots — software applications that perform automated tasks online — to drain the gift card balances of unsuspecting consumers.
Scammers might use a bot called GiftGhostBot to scour retailers' online gift card balance check systems. The bot is searching this system for gift cards that have been activated. When the bot finds one, criminals use the gift card number to make purchases themselves or they sell the gift card's information on the dark web. When you use your card, you discover that the balance has been drained and the gift card is useless.
One way to avoid this scam? Use your gift cards as soon as you receive them, giving bots less of a chance to discover your card information.
Scam 3: The shady cashier
Sometimes a store's cashier is in on the scam. Say you purchase a gift card at a department store. The cashier might activate that gift card but instead of handing it back to you, switches the card with one that hasn't been activated. The cashier then keeps the activated card and gives you a card that doesn't work. The cashier can then use the activated card that you bought to make purchases.
The best way to avoid this scam? Watch cashiers as they check you out. Make sure they hand the gift cards back to you as soon as they activate the card.
Scam 4: Stealing the numbers
Another popular gift card scam? Thieves, often armed with a magstripe reader that reads the numbers stored in a magnetic stripe on gift cards, grabs handfuls of gift cards from stores such as Walmart or Target. The thief scans the gift cards with the reader, storing dozens of card numbers. The scammer than puts the gift cards back on display and leaves.
The scammer next calls the customer service numbers on these cards and enters the copied gift card numbers. This will tell the scammer if someone has purchased and activated the gift card and how much of a balance is left on the card. The scammer can then use the gift card number to make online purchases, draining the balance of a card you bought.
Want to avoid this scam? Don't buy gift cards off publicly displayed racks in retail stores.
Scam 5: The online auction scam
You might be tempted to buy gift cards at online auction sites. Don’t. Scammers often sell gift cards that haven’t been activated at these sites. You pay for the cards — thinking you’re getting a bargain because you’re paying less than the card’s face value — only to find that the gift card doesn’t work.
Other scammers lie about the value of the gift cards they are selling online. They might claim that the gift card is for $50. You pay for the card, receive it, and find out that it only has $5 left in its balance.
Avoiding this scam is simple: Never buy gift cards from an online auction site. If you do want to buy gift cards online, buy them directly from the retailer offering them.
Scam 6: The fake prize
You might get a call, email, or text message from a scammer claiming to be with a lottery or contest. This scammer says you’ve won a trip, new car, or cash prize. But to claim the prize, you must first pay a redemption or claiming fee with a gift card. The scammer asks you to purchase a specific gift card, call back, and read the card’s number and PIN over the phone.
This, of course, is another scam. No legitimate lottery, sweepstakes, or business will ask you to pay a fee to claim your prize. And you’ll never win a prize from a sweepstakes or lottery you didn’t enter in the first place.
Scam 7: The power company calls
You’re sure you’ve paid your utility bills on time each month. But one day, someone claiming to be a representative from your public utility calls and says that you owe money. If you don’t pay up immediately, the utility will shut off your power or water. And the only way to pay is with a gift card that the utility company “representative” tells you to buy.
Again, this is a scam. The person calling isn’t from the utility and will simply use your gift card information for a shopping spree. Your public utility will never call you to say that you owe money. It will instead send a letter.
Your utility also won’t threaten to shut off your power or water without first giving you plenty of warning and time to pay back what you owe.
And utilities won’t accept payment through a gift card.
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Dan Rafter is a freelance writer who covers tech, finance, and real estate. His work has appeared in the Washington Post, Chicago Tribune, and Fox Business.
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