The Gift Card Scam of 2011: Don’t Be a Victim

Photo: Wonderdawg

It’s the most wonderful time of the year…for scam artists. When the shopping craze hits us after Thanksgiving, the thieves come out in droves and this year, they are targeting one of the biggest gift items we both give and receive — gift cards. (See also: Why I Love Gift Cards)

It’s a multi-million dollar industry, so it’s no surprise that scammers and con artists have put gift cards on their own wish list this year. And because of them, you could be in for a nasty surprise when you go to spend a gift card you received. In fact, your gift card could already be worthless.

That’s right, a gift card you have received or bought someone else could already have a zero balance. It’s a problem even U.S. Senator Charles Schumer is trying to warn people about.

Here’s how the thieves are picking your pocket without you even realizing it.

How the Gift Card Scam Works

Every gift card you buy has a magnetic strip on the back, similar to the one on your debit or credit card. This strip is basically there to record the running balance, the card number, and the PIN number if it has one.

The gift card thief has found a way to retrieve the information contained in that magnetic strip using a simple reader that can be bought very cheaply on the internet. The thief will then go to one of those racks filled with cards and read the information from them. Usually, they will target the cards with larger dollar amounts printed on them (even though they are not yet activated) as well as blank cards and lower denominations.

You may think that the packaging on the gift card can prevent that, but it’s no barrier. Most of the time the card can be lifted from the packaging, read, and replaced. Sometimes, the strip is visible in spite of the packaging. And many cards aren’t even placed into a wallet or gift card holder until after they’ve been activated.

Once the thief has the numbers, he/she waits patiently and checks the balances online. And it’s not long before those cards are activated in store by someone like you or me. Then the thief can use the gift card numbers to spend that money quickly, either online or in store, and run the balance down to zero. You, or most likely your gift recipient, won’t even realize it until weeks or months later. When the theft is noticed, it could not only be very embarrassing and frustrating, but also too late to do anything about it. The best chance you have to get your money back is as soon as the theft has occurred.

What Can You Do to Protect Yourself?

There are several steps you can take to make yourself less vulnerable to gift card scammers. Unfortunately, nothing is 100% fool proof (other than refusing to buy or receive, gift cards), but these tips should help you avoid their traps.

1. Carefully Examine Any Gift Card You Are About to Buy or Receive

When buying a card, be alert. Look for any obvious signs of tampering with the card holder, the scratch-off panel, the magnetic strip or any other wear and tear. Gift cards and the holders should be in pristine condition. If you see a PIN, put it back. The PIN should always be covered. When you receive a card, do the same thing, but be tactful; you don’t want to upset the person who just gave you a gift, so do it out of sight. If you see anything suspicious, it may be time to check that card out.

2. Don’t Buy Cards From Public Display Racks in Grocery or Retail Stores

The first place gift card scammers look is those big racks filled with cards. They aren’t protected or policed because they are not activated yet and thus are considered worthless. But those racks are easy picking for thieves, who can scan dozens of cards at one time.

3. Use Gift Cards Immediately

Don’t just pop them in the junk drawer until the day comes that you want something from that store. That just gives thieves plenty of time to use the card and leave you high and dry. Go and spend that money. You should also register your card online if you can. Most retailers have that option, and you can instantly see the balance and track your usage.

4. Discourage Friends and Relatives From Buying You Gift Cards

Yes, they are a great way to give a gift, especially for people who live far away and don’t want to pay for big parcels or risk buying an unwanted gift. If people want to send you money from far away, they can always wire the money. For people who live close, it may be time to put money in an envelope again. It’s not ideal, especially if you want to encourage kids to spend their money at a book store, but at least they’ll have money to spend when the shopping day comes.

5. Never Buy Gift Cards Via eBay, Craigslist, or Other Non-Retailer Websites

Sadly, that’s just too easy for the thieves. Your best bet if you are going to buy gift cards is to get them directly from the retailer’s website. If you want a Barnes & Noble gift card, get it from If you want a Home Depot gift card, is the place. There may be cheaper deals elsewhere, but they’re just not as reliable.

6. If You Buy the Card in a Store, Get the Cashier to Double-Check the Balance

There is no shame in asking the cashier to give you a print out of exactly what is loaded onto the card at that time. You’ll see the current balance instantly, and it will also protect you from another gift card scam, where thieves swap out worthless, used cards and pocket the ones ready to be loaded with money.

7. Get a Receipt, and Keep It With the Card

When we bought our home, our real estate agent gave us a Home Depot gift card, and he gave us the receipt to go with it, just in case. We were glad to have it. The gift recipient already knows the amount put on the card, so there is no reason not to hand it over with the gift card. It’s just a little extra protection.

What If You’re a Victim?

Sadly, there’s not a lot you can do. Unlike credit and debit card fraud, there are few protections offered by the gift card issuers. If you lose your card, you can simply report it as lost or stolen, and the card will be voided. You will receive the remaining balance on another card. However, by the time you know your card has been compromised, the balance will most likely be $0. And there’s not much you can do to reclaim that stolen money.

If you have the receipt that came with the gift card, you may be able to get compensated for the loss. These days, many retailers can track the usage of a gift card, including where it was bought and where it was used. If you, or the person who bought it, picked the card up in Colorado, but it was used in New York, then that could be proof. Of course, people send gift cards all over the country, so it’s not concrete evidence.

Have you been the victim of a gift card thief? Let us know, and tell us how it happened. Remember, with every passing year thieves get more sophisticated, and that means you have to be more vigilant.

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Guest's picture

I didn't know this was possible, but it may have happened to me. We were given a gift card for a turkey for troops thing, and when I went to redeem it there was nothing on it. It still could have just been an indian giver though.

Guest's picture

I had a slightly different situation with an electronic gift certificate. I got an electronic $100+ gift certificate/card for CVS which can only be printed and used in-store. Can't even use it online. Went to use it on Black Friday and it was down to $0. I checked the balance online and it had been used in Colorado (I'm in FL) just two days prior. I had to call several times but they did give me a new gift card. I can only think that there was some internal mix-up or fraud happening in that case. How else could someone have gotten the number? I didn't even print it until the same day I tried to use it.

Guest's picture

One other way to prevent giving scammed cards- use your favorite charity's scrip program. These programs sell gift cards (usually from a secure provider) and a portion of the sale goes to the charity, while the gift card retains all of its value.

Thanks for the heads-up about cards on store racks!

Guest's picture

I used to work at Barnes & Noble, and I know the gift cards would be packaged so that the cashier could easily access the magnetic strip to load the card. It would be super easy to access a card with those foldable cardboard packages without making it obvious that the card had been touched. All big stores also have gift cards behind the counter. Ask for yours from there and you can probably avoid the scam.

Guest's picture

my parents were victims of this gift card fraud and are out $250 in Macy's gift cards. That is not right or fair to them. Dad spent $250 at Kroger, gave to Mom for Christmas and she just went to use last week and there is a zero balance. So, they are both out (he $250 cash and she is out a gift).

Guest's picture

I'm a victim. I was given a card for x-mas and when I went to use it. It didn't pull up anything. Like it wasnt activated. I have the receipt but no one can give me a straight answer. I guess I'm out $100.00. This is a crime. My recommendation don't buy gift cards!

Guest's picture

My husband and I have received a $300 gift card from Macy's for our wedding present. We went to the store to use it 2 months later, and the balance on it was $0. The clerk told us the card was used by someone to buy 2 pillows and a comforter in some other part of the country. We called Macy's fraud line, and they have told us that they will investigate it. They took our contact info, and said we would hear back in 3-4 weeks. I'm wondering what is our chance of getting this money back? The security code was not scratched, and the store employee was the first person to do it when we tried to charge it. I'm very disapointed in Macy's at the moment. It almost sounds like an internal fraud, because how would someone know the security code to use that gift card, unless they had access to their computer.

Guest's picture

Same thing just happened to me with Macy's. Went to use a gift card that was a wedding gift, and it had a zero balance. The fraud department is extremely unhelpful. After faxing a letter and the information they requested, they said they couldn't do anything without a proof of purchase. Why would I have a proof of purchase if it was a gift? They need to put the customer first.

Guest's picture

Wow, and to think there are those who think a "cashless" society is the way to go. I just left Macy's a couple of hours ago. While there, I attempted to use a gift card that I had received for Christmas 2011. The initial amount was for $100 and as of today, I still had $86 left on the card (or so I thought). When I attempted to make my $18 purchase, I was told the card had a 0 balance. I immeditely went to their office to seek an explanation. After several checks on their computer, I was told that my card number was used along with several other cards on a transaction for a Michael Kors watch at one of their stores in CA. I live in KY and have never even been to CA. The lady that was helping me made what I thought was an interesting comment. She said that whenever they see "CA" show up, they can pretty much tell that it is fraudaulent activity. That led me to believe that they are well aware of this being a problem. Fortunately, my situaiton was resolved rather quickly. They gave me 4 $25 Macy certificates. As others have mentioned, my card was purchased directly from our local Macy's store which would lead one to believe that the fraud happening with these cards is an internal problem. When I got home and went online to try to research this issue, I was surprised to see blogs and comments that go back several years. That's ridiculous; Macy's really need to address this problem.

Guest's picture

Although I felt a little relief after reading similar issues with the Macy's gift card to know that I am not the only victim, I am alarmed at the amount of reports I've read online. This seems like it happens often and Macy's needs to correct this problem soon.

My husband and I received several Macy's gift cards for our wedding and got one for a friend's wedding shower. Our friend told us that she tried to use it last week but the cashier told her it had $0 balance. She was hesitant to tell me because what do you say to the person who gave you the gift..."hey thanks for the gift card but you gave it to me with $0 balance." But I am glad that she did because that night my husband called the number on the back of the gift card to report it. Apparently it was spent somewhere in Los Angeles, CA. Which is totally weird because we haven't been to CA in the past year. Curious, my husband also asked the customer rep to look up our other Macy's gift cards we recieved from our wedding. They ALL showed as $0 balance and these were gift cards given to us by different people so it's not an isolated case. She said the cards were used in, you guessed it....CA! I almost had a heart attack. We have reported it and given them our info but I'm not confident that anything will be resolved. I wouldn't freak out so much about it if it was $25 or so but it was much more than that. Besides, I feel badly for my wedding guests who spent the money and kindly gave to us as gifts.

Coincidentally as I was typing this a co-worker stopped by and I told her about the situation. In which she responded that this has also happened to her! Unbelievable!!! Lesson learned that I will never buy a Macy's gift card again or any gift card for that matter. I hope I don't ever receive a Macy's gift card as well.

Guest's picture

Went to use my Macys gift card last night which my husband bought me for Christmas. I was told I had a zero balance. The clerk had to scratch off the back for the 3 numbers. Obviously I had not used it. I called to check the balance and was told that on Jan 11th 2 purchases were made. Funny how the 2 purchases totaled exactly $100.00 down to the penny.

I'm not sure if there is anymore I can do? I have the reciept. My husband purchased 2 gift cards at Ralphs, the other one from Amazon worked. I guess I will never buy another Macy's gift card. Cash is King.