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According to the study, payment by gift card is a common thread among many scams that have been the subject of previous BBB studies, including government impersonators, business email compromise frauds, tech support frauds, romance scams, fake check scams, prize/sweepstakes scams, and online sales of nonexistent vehicles.
“If you’re asked to make payment via gift card for whatever reason, you almost certainly are dealing with a scam,” said Michelle L. Corey, BBB St. Louis president and CEO. “Gift cards don’t carry the same protections as credit or debit cards, so funds spent on gift cards are funds you cannot get back.”
Available data suggests that gift card payment scams are growing fast. The losses reported to BBB Scam Tracker for this payment type nearly tripled between 2017 and 2020, with a median loss of $700 in 2020; consumers over 65 were more likely to lose money than younger consumers. The Federal Trade Commission (FTC) reports that roughly one in four people who lost money to a scam not related to an online purchase paid with a gift card, with reported losses of $245 million since 2017.
Typically when gift cards are requested as payment in scams, the scammer instructs the consumer to buy a gift card — or several — and either read the numbers on the back over the phone or send a photo of the numbers on the back. If victims ask questions about why gift cards are being used for payment, scammers invent a plausible excuse, such as that the government has recently entered a contract with a gift card company to handle transactions.
Commonly requested gift cards include eBay, Google Play, Target, iTunes, Amazon, and Steam, an online gaming company. The scammer might promise to reimburse the consumer later or may send a check in advance for the consumer to deposit. In reality, the funds do not materialize or the check is invalid, and the consumer has lost the funds forever.
Gift cards cannot be tracked easily and do not carry the same legal protections as credit or debit cards, making them an attractive option for scammers. While the FTC’s Telemarketing Sales Rule (TSR) has extensive provisions governing telemarketing — which prohibit the use of credit cards, debit cards, and reloadable cards such as Green Dot cards — it does not currently prohibit the use of gift cards in telemarketing.
A Springfield, Missouri, woman in her 80s received a call in November 2020 from someone who claimed to be with Apple and told her that her iCloud storage was compromised. The woman was instructed to buy gift cards in order to protect her data and tell any cashier who questioned the transaction that they were gifts for grandchildren. She subsequently purchased 29 $500 gift cards to Target and Walmart, scratching off the numbers on the back and photographing them with her phone. In total, the woman lost $14,500.
Red flags to know and avoid include:
- Government agencies requesting payment. No government agency ever requests money through gift cards.
- Statements that buying gift cards is a safe way to make a payment. Providing the numbers for a gift card is like sending cash, and the money is rarely recoverable. Gift card payment requests are a big red flag for a scam.
- Keep the receipt when buying a gift card.Keep the physical card as well. These may help prove that the card was paid for and activated if problems arise later.
- Inspect the card carefully before buying it to be sure it has not been tampered with. Some scammers open the card to get the numbers on the back so that they can take the money when the card is later activated.
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