Common Types of Gift Card Scams and How to Avoid Them

| Updated
by Ibukun Ogundare · 6 min read
Common Types of Gift Card Scams and How to Avoid Them
Photo: Shutterstock

Despite the government’s efforts to curb gift card scams and other cyber frauds, they keep increasing daily, and more innocent citizens continue to become victims. The guide below will provide more details on gift card scams as well as give some tips how not to become a victim.

Are you one of the many that believe they can never be victims of cyber scams? Let us hope you are right. Hopefully, you never lose to a scammer. Just answering a phone call, you may lose a lot of money to a cyber-criminal who may even be miles away from you. Cyber crimes are growing by the day, and victims include both the literate and illiterate. Being learned is not an immunity against scams, especially gift card scams.

Yes, there are gift card scams, and they are among the most widespread cyber threats. As gift cards are popular tools among consumers for their convenience and easy use, they are also a vehicle for fraud for cybercriminals. You may have heard about a gift card scam. Or maybe you have a gift card but are unaware of the gift card scams existence. As a matter of fact, there are multiple gift card scams. The good news is there are ways to avoid being a victim of gift card scams, and this guide will answer all your gift card scam-related questions, especially how to avoid being a casualty in this troubling plague.

Gift Card Scam Defined

A gift card scam can be spotted the moment someone asks to be paid with a gift card. As the name suggests, gift cards are for gifts. They are for purchases and not for payments. Sometimes called gift vouchers or gift certificates, a gift card can be used to purchase items from a retail store, pay for food at a restaurant, pay for fuel at a gas station, and so on. However, the moment someone is required to pay for something by putting money on a gift card and then giving out the numbers at the back, that is a gift card scam right there.

A typical gift card scammer successfully gains the victim’s confidence by pretending to be someone else. Criminals often pretend to be government employees, family members, or other persons of the prey’s interest.

According to the Federal Trade Commission (FTC), gift cards have annually remained at the top of the list of reported fraud payment methods since 2018. The FTC report shows that scammers trickly insist on gift cards because they can yield quick cash to them without revealing their identities. With one in every four victims of fraud claiming they paid with a gift card, the report includes that about 50% of the victims claim to give the scammers the PINs at the back of their gift cards.

Types of Gift Card Scams

Criminals continually use different types of gift card scams to steal from cardholders beginning with tricking them via phone calls, texts, emails, or even a false antivirus pop-up. This kind of scam can also happen physically in brick-and-mortar stores. Below are common types of gift card scams that result in losses for many:

  • Money collection. This happens when someone calls, pretending to be an Internal Revenue Service (IRS) employee and claiming that the recipient owes unpaid taxes. Sometimes, these fraudsters even reach out via texts or emails. They make threats that the person would be jailed unless they pay the money owed immediately, triggering an atmosphere of panic. They insist on payment with a gift card and demand information like card numbers and PINs, which they eventually use to make online purchases.
  • Online auctions. Criminals offer gift cards for less than their face value online on auction sites. Such offers are usually tempting, but either the gift card does not work or the balance left in it is less than they claim.
  • Fake prizes. “Hello, you have just won a fully-paid trip to Dubai, but you must redeem your prize with a gift card.” That is not true. The all-expense paid trip is the attraction to getting the gift card information and completing the scam.
  • Stolen codes. Another common gift card scam occurs through the code theft of physical gift cards. Many scammers walk into gift card stores and trickly get the codes of yet-to-be-purchased gift cards while innocent customers purchase and activate them. Upon activation, the scammer can use the stone codes to make online purchases.
  • Gift card generators. Criminals offer downloadable apps, online gift generators, or websites, claiming it will allow users to generate codes redeemable at online retailers. Here is the catch- it requires the provision of personal details and credit card numbers, which they use for fraud. As a matter of fact, these downloads may introduce malware to the computer, which makes it vulnerable to other illicit activities.

How to Avoid Being a Victim

It is important to know that anyone that insists on being paid with a gift card is a scammer. Gift cards are for gifts, not for payment. The IRS will never call, text, or email about unpaid taxes- only scammers do that. Instead, the IRS will send a letter with a phone number for the debtor to call. Also, the IRS does not threaten to jail people for unpaid taxes, and the agency never requests to be paid with gift cards.

Gift card holders should never click on suspicious email links or attachments from unknown and even known senders.

In addition, steering clear of buying gift cards from online auction sites is another way to avoid being a victim of gift card scams. The best way to buy a credible gift card is from the original retailer. People should expect less to reap where they do not sow. Many get swindled while redeeming a lottery they had not put in for or a prize they know nothing from. People should understand that it is unlikely to be true if it is too good to be.

Most importantly, individuals should be alert and constantly informed of new tactics for gift card scams. Most thieves who call to demand the card numbers claim the matter is urgent. Hence, they are in a hurry and tend to pressure the recipient. Some callers ask victims to buy gift cards and load them, even specifying what kind of gift card to buy. Another trick they deploy is to ask the innocent call recipient to purchase gift cards from different stores to avoid raising the cashiers’ suspicion.

Cyber fraud is an increasing business worldwide, and many have lost their life savings to it. Some romance scammers pose on dating websites, make up pitiful stories, and ask their partners to send them gift cards. Everyone is advised to be smart, alert, and cautious to avoid being a victim of gift card scams.

Bottom Line

Despite the government’s efforts to curb gift card scams and other cyber frauds, they keep increasing daily, and more innocent citizens continue to become victims. The authorities’ effort is limited when the people they are trying to protect remain in oblivion. The IRS, utility company, or any other registered company will not demand gift card numbers and PINs. No credible organization will ask for gift card information.

As the number of gift card scams is increasing, you need to be aware of how to protect yourself and not become a victim.

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FAQ

What is a gift card scam?

A gift card scam is knocking when someone calls, texts, or emails you to demand to be paid with a gift card. The person may pose as a government official, business, utility company, or relative. Simply put, a gift card scam is a type of fraud where criminals trick victims into revealing the numbers on the back of their gift cards or sending them online gift cards. 

What are the types of gift card scams?

The types of gift card scams vary from threatening calls from the “IRS,” bots, theft of gift card numbers, and fake prizes that are only redeemable with gift cards to physical tampering. Notably, these swindlers continuously come up with new scamming methods. 

How do gift card scams work?

Typically, gift card scams begin by pressuring the victims into buying a card and tricking them into providing its number and PIN, after which scammers redeem it for its total value. Gift cards are as anonymous as cash, which makes them untraceable and more attractive to criminals. At the same time, gift cards do not raise red flags like wire transfers, which makes it easier for fraudsters to access funds. 

How can merchants prevent gift card fraud?

Some ways merchants can prevent gift card fraud are:

  • Utilizing practical fraud detection tools to combat illegal purchase of gift cards. 
  • Creating additional authentication steps for gift card purchases or multiple purchases from the same IP address. 
  • Restructuring repeated gift card purchases. 
  • Tracking tools for gift cards.
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