7 Types of Gift Card Scams: How to Spot & Avoid Them

Michelle Wilson - February 18, 2022

If you’ve ever received an urgent call from the IRS or border patrol telling you to pay the sizeable fee with an electronic gift card, you’ve likely experienced a gift card scam attempt. These criminals try to convince innocent victims they owe immediate money or risk devastating and life-changing consequences.

Anyone receiving these messages, whether email, text, or call, should promptly ignore them. They’re classic examples of gift card fraud, a type of scam that tries to gain financial resources through gift card balances.

Thankfully, spotting and avoiding these types of scams isn’t tricky. To help you recognize the common types of scams, here are a few tactics used by criminals and how to avoid becoming a victim.

How Gift Card Scams Operate

Criminals behind these scams rely on extreme consequences and high-pressure tactics to convince victims to act quickly. According to the Federal Trade Commission, scammers will typically email, text, or call individuals and tell them they’re in criminal or financial trouble. Some criminals will suggest victims haven’t paid taxes or fines, while others target billing errors (like mortgage payments or utility accounts). The scammer will threaten immediate action if the balance isn’t resolved. These threats may include jail time, warrants, disconnection of services, or foreclosure.

Scam artists will demand a victim purchase a gift card to pay off the balance and remove the immediate threat. The gift card may include an electronic version of the account or the card number and PIN. Once sent to the criminal, the balance is spent on miscellaneous items, with the victim out the money permanently.

The Top 7 Types of Gift Card Scams

Scammers will target various channels, including text, robot calls, or spam email requests. Here’s how to spot these scams and how to avoid them.

Threats from the IRS

Arguably one of the most common gift card scams, this tactic has a criminal reach out claiming to be working with the IRS. The scammer will tell you about past due or unpaid taxes, sending the police after you if you don’t immediately pay the balance. The criminal will always demand payment with a gift card balance. The target must purchase a gift card from a specific retailer and give the caller the card number and PINs. The scammer uses this information to make online purchases with the cards.

The IRS will never email, text, or call an individual about past due or unpaid taxes. The IRS will send a letter with a phone number to contact the office. Likewise, the IRS will never threaten jail time for taxes. Finally, the IRS will never demand repayment of taxes with gift cards.

Bot and Automated Use

Most gift card scammers will use bots to drain the gift card balances of unsuspecting individuals. These bots are automated software applications that perform routine tasks through basic operations. One typical program is a bot called GiftGhostBot. The bot searches through the system for activated gift cards, checking card balance checks. When the bot finds one, the thief uses the number to make purchases online or sell the gift cards independently through the dark web.

The easiest way to avoid this scam is to use the gift card as soon as you receive them. The faster a recipient uses the gift card, the less chance the bot will discover the information.

Shady Cashiers

Periodically, a cashier is involved with the scam. This tactic has an individual purchasing a gift card from a department store. The cashier will activate the gift card you’re buying but switches the card with one that hasn’t been activated. The cashier uses the activated card you initially purchased when leaving the store.

Ensure the cashier hands back the gift card as soon as it’s activated to avoid this scam.

Stealing Card Numbers

A popular gift card scam uses a magstripe reader to steal gift cards with magnetic stripes. The thief grabs a handful of gift cards from popular stores, scanning each card with the reader. By scanning these cards, the reader stores the card numbers. The scammer then puts the gift cards back on the shelf and leaves the store.

The scammer will call customer service, entering the copied gift card numbers into the automated service. When a card shows an active balance, the scammer uses the gift card balance to make online purchases, draining the balance in the process. Avoid this scam by purchasing cards with hidden card numbers.

Online Auction Scams

Many scam artists use online auctions to capitalize on unsuspecting victims. Scammers will often sell gift cards that haven’t been activated through these sites. Essentially, a victim pays for the card, usually only a fraction of the card’s face value, only to find the gift card doesn’t work.

While the discounted prices are tempting, it seldom works out well. Occasionally, scammers will lie about the gift card’s value, suggesting a card’s value is $50 when there’s only $5 left on the card. To avoid this scam, never purchase gift cards through online auctions.

Fake Prizes

Malicious actors will contact a victim, claiming to be with a contest or a lottery. The scam artist will make promises of a substantial cash prize or high-value item. The victim must pay a small fee or redemption cost to claim the prize. The scammer asks you for a specific gift card, including the card number and PIN. Unfortunately, there are no prizes or sweepstakes.

The Utility Company Calls

You’ve never forgotten to pay a utility bill, but someone randomly contacts you, claiming to be a representative from the company. They state an outstanding balance, threatening to shut off the water or gas if you don’t rectify the account immediately. The representative tells you to pay the balance with a gift card balance from a specific store.

A utility company can’t use gift cards to remove outstanding balances, making this attempt the most significant red flag. The individual on the other side of the call will use the gift card balance online, leaving you without the cash. It’s important to remember that power or water companies won’t accept payment through a gift card, nor will they threaten to disconnect the water without warning and time to pay the balance.

Conclusion

Scam artists often look for easy targets, using fear and fast-acting tactics to portray urgency. Although the story might change, the objective will remain the same for these scammers. Act quickly, firmly, and convince their targets to act immediately. Once a gift card balance is used, there is virtually nothing a provider can do to reverse the charges.

If you happen to receive a call, email, or text telling you there is a warrant for your arrest (or another similar threat), delete the message and block the account. Don’t interact with these individuals and never send through gift card numbers.