The Holiday Joy—and Cautionary Tale—of Gift Cards
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Ever used a gift card to pay your tax bills, help your CEO out in a pinch, or combat identity theft? I’m guessing no. Usually, gift cards are an opportunity for your hard-earned money to go towards something meaningful for the individual receiving your generosity. They can be used to buy basic needs like clothing and food, help fill in the gaps for a new baby, or buy those must-haves for school or work. This begs the question, what are they not good for?
During the holiday season, when gift cards are flying around like peppermint candy, the Better Business Bureau (BBB) wants to remind individuals to be cautious of who they are buying gift cards for. More people reported gift card fraud to the BBB Scam Tracker this year, with a 50 percent increase compared to last year.
How Does a Gift Card Scam Work?
For starters, this can happen to anyone. I was personally targeted by an individual posing as the CEO of BBB Great West + Pacific. I received a text from an unknown number saying they were in a meeting and requested I purchase gift cards to donate to a charity. Luckily, I knew the red flags and caught on immediately. I notified the CEO, my IT department, and the entire company in case someone else got a similar text.
For years, scammers have preferred a gift card as payment because it’s treated like cash. If a victim is convinced to hand over the 16-digit code and PIN, the money is instantly in the scammers’ pockets. Most reports to BBB are the result of fraudsters impersonating sellers, businesses, or governmental agencies in order to convince consumers to send them gift cards. Persuading victims that they have an unpaid tax bill, owe fines, or have a hacked personal account are all common ruses used as part of gift card scams. Sometimes scammers ask for a popular brand and other times they ask for a general-use card, such as a Visa Vanilla or American Express gift card.
Current Issue
December 2024
In one instance reported to BBB, scammers pretended to be from the FBI. They advised a consumer to move her money onto Walmart gift cards, to be exchanged with the government for cashier’s checks. Talking to another victim, bad actors pretended to be from Microsoft, calling about an expired service.
What Are Scammers Doing With Gift Cards?
For both scenarios mentioned above, once the gift cards were purchased and handed over to the scam group, they turned to associates—a common practice. The associates were given the gift card numbers and moved fast. They tried to spend some at a local store and “wash” the rest by buying a second round of gift cards with the first to obscure the funds from authorities.
Authorities, however, caught onto the scam and seized $89,000 in unused gift cards. Earlier this year, the scammers were sentenced to several years in prison and ordered to repay more than $200,000 for the fraud.
Stopping Gift Card Scams
In an interview with BBB, Larry Lundeen, senior vice president of Global Security and chief security officer at Walmart, laid out the way the corporation has developed innovative technologies to prevent gift card scams. And in a massive reversal to past years, some consumers are now recovering their money.
In 2018, Walmart deployed a technology called Redemption, which contains an algorithm with “red flag” markers for gift card fraud. If confirmed as fraud, the funds are placed into an escrow account and turned over to the Secret Service, which works with the Department of Justice to return the funds to customers.
“This is not a competitive space with others,” says Lundeen. “By collaborating with other retailers, law enforcement, and associations, we are working to mitigate this industry-wide issue.”
Earlier this year, I was heartened to learn that the partnership was able to return almost $4 million to consumers who purchased Walmart gift cards as a part of a scam.
BBB Tips to Avoid Falling for a Gift Card Scam
To wrap up, here are some red flags I’d like you to keep in mind:
- Be on guard if anyone ever asks for gift card payments.
- Stop immediately if a person claiming to be from the government asks for a gift card.
- Take a step back when someone asks for a gift card number or PIN over the phone or email.
- Be wary of promises to reimburse you through a check.
- Keep all information related to the gift card purchase if you do fall victim to a bad actor.
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