Gift Card RackWhen times get tough does there seem to be a rise in credit card scams? This gift card scam is certainly not new but it does seem to be getting more attention. Let’s talk about how this particular gift card scam works so that you can be on the alert and protect yourself against falling victim to this scam or any other type of similar gift card scam. Here is how it works…

How Gift Cards Work

First, a little background on how most gift cards work to let you know where the particular gift card security vulnerabilities lie. Gift cards are very similar to credit cards in that each gift card typically has a 16 digit number on the front of the gift card, an expiration date on the front of the gift card, and a 3 digit security code on the back of the gift card.

Gift cards are often left out in the open in many different retail stores like Wal-Mart, CVS, Target, etc. with minimal security because gift cards are not preloaded with any funds so a thief could steal a whole stack of gift cards and they wouldn’t be worth more than the money they could get from recycling the plastic.

When a gift card is purchased at the register then the cashier will swipe the gift card and load funds onto the gift card from whatever payment method the purchaser of the gift card chooses. The store register then communicates electronically with the credit card company or whatever company is providing the gift cards so that the company can keep track of how much money is loaded onto each purchased gift card.

Then once the gift card is activated first at the register (and then sometimes by the purchaser who may have to scratch off an activation code and call in to an 800 number) the gift card can be used for purchases by either swiping the gift card in person or by entering in the gift card number, expiration date, and security code to make a purchase online.

Gift Card Details

OK, that is the basics of how gift cards work so let’s see how this gift card scam is actually pulled off.

The #1 Gift Card Security Risk

The #1 biggest security risk with gift cards is that there is no cardholder name associated with most gift cards (at least not the kind that you can walk into a retail store and pick up off of the rack to purchase – although gift cards purchased online are obviously much safer as long as it is from a reputable company – i.e. an American Express Gift Card is a smart idea). This means that anyone can use a gift card to make purchases online if all they have is the card number, expiration date, and security code.

Gift Cards No Name

How Gift Card Scammers Attack This Vulnerability

As mentioned above, only an idiot would try to steal gift cards that have no funds loaded onto them but a smart credit card scammer will walk into a retail store, head right over to the gift card rack and start recording the gift card number, expiration date, and security code of many different gift cards and then place them back on the rack and wait for someone else to come along and purchase the card, load funds onto the card, and activate the card.

The gift card scammer knows that all of the gift card numbers, expiration dates, and security codes for those gift cards that they had recorded are worthless at first BUT when the card becomes activated at some point in the future by an unsuspecting gift card purchaser then the scammer immediately can start making purchases online.

How does the credit card scam artist know when there are funds on the card? Well, they simply head right on over to the GiftCards.com Gift Card Balance Checker and start plugging away their group of numbers (and if they are smart then they notice that there is not even a CAPTCHA on the Balance Checker so they write a little script to have a computer program bulk check many different gift cards all at once automatically every so often and then notify the scammer when any of the cards returns a hit as having funds available to spend (note: from what I can tell the GiftCards.com Balance Checker might just check the balance of certain types of gift cards so scammers may use other tools for checking different gift card balances of course)).

Gift Card Balance Checker

And it Gets Worse…

What makes this even worse is that:

A) Many people do not spend all of their gift card funds in the first place (see our post on unused gift card statistics.

B) Many people receive gift cards as gifts (duh) so if they go to make a purchase with their gift card and the balance is not as high as they had expected from their gift then they may not even say anything at all to the gift giver for fear of embarassing them or appearing cheap.

C) Credit card scammers have perfected the use of miniature hand held devices that can scan gift card numbers, expiration dates, and security codes in half a second while staying concealed in the scammer’s palm (even through packaging!)

Gift Card ScannerHow Can You Protect Yourself?

One of the best ways to protect yourself from this gift card scam is to try to always buy your gift cards from places that keep their gift cards behind the counter or locked up somewhere rather than places that keep their gift cards out on public display. Additionally, be sure to keep your receipt and be sure to alert your gift card issuer of any suspicious activity on your gift card account.

What do YOU Think?

What do YOU think about this gift card scam?

What other ways can you protect yourself from being a victim of this gift card fraud?

In what ways might gift card issuers proactively put a stop to these kinds of gift card scams?

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Disclaimer: This content is not provided or commissioned by American Express, Visa, MasterCard, Discover, or any other credit card company or issuer. The opinions expressed here are the author's alone, not those of any credit card company or issuer, and have not been reviewed, approved or otherwise endorsed by any credit card company or issuer. Credit Card Chaser may be compensated through various affiliate programs with advertisers. As always, Credit Card Chaser is an independent website commmitted to helping people research credit card offers and find the best credit card!

8 Responses to “Credit Card Scam Alert: Watch Out for This Gift Card Scam”

  1. James says:

    wow this is scary. i feel bad for anyone this has happened to. this is very smart and sneaky but very unethical at the same time.

  2. Eva Elizabeth Wood says:

    Well I am glad to know how the gift card scam works. I never use the gift card in a restaurants. Chances are the waiter will steal the numbers off the card at the cash register. Credit and debit cards too.

    • Dianna says:

      That is a really stupid and insulting thing to say. I have worked for a nationwide casual dining restaurant chain as a server and trainer for 5 1/2 years, and I have never considered doing such a thing, and have heard no stories or rumors of anyone else doing that, either.

    • christin says:

      I have also served for 3 years for a large dining chain and would never think about doing that. the thought has never crossed my mind. we actually had a hostess who was going thru employees purses and stole our numbers and bought a bunch of tmobile phone cards. they got caught beause theyre idiots and if a server was to do this they would get caught by the police also.

  3. Treasy says:

    I received a gift card from united nissan for taking a test drive to GiftCardRack.com I can’t even use it,,so I will wait for customer service tomorrow just be prepared before you waste your time and get nothing for your time.

  4. Acevedo says:

    I was a victim of this fraud. I got a $100 American Express card from my parents a year ago and when I went to use it, the merchant told me there was a zero balance on the card. I called the 1800 number on the back of the card and they told me, that there had been a transaction online. Thus, American Express send me a new card with the balance.

  5. max says:

    i won a gift card from honda the card company is giftcardrack.com it has 14 digit card # the black bar on back need i say its a half a inch off from where its supposed to be and it has no 3 digit code on back. on the back it say purchase can be made prior 2 check out but i cant find the site it brought me here so the best thing you can do is if you win a gift card ask questions and look for the cv 3 digit code on back if its not there call the cops or put a hurtin on that person and point him/her to the nearest special needs school lol

  6. Sam R says:

    This just happened to me. I am freaking out, I don’t know what to do. I was helping out at my mom’s office and am paid in gift cards. I had like 5 that were worth $250 each.

    I just opened my last one TODAY, and tried to buy a $3 coffee this morning and it wouldn’t work. Checked online, just now and it says that I have $0.00 account balance. I hadn’t even opened the card until today and $250 is gone!!!

    I checked my “Transaction History”, it says that I spent $250 at Holt Renfrew (I don’t even know what it is) in Toronto (a place I haven’t been in 9 years) back in October of 2012 (before I even got the card)!!!!

    I don’t know what to do, I needed that money for textbooks.

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