The Gift-Card Scam You Need to Watch Out for
As the holiday season rushes full steam ahead, gift-card scams are on the rise. Learn how to detect and prevent this growing threat.
As soon as Jean White* saw yesterday’s customer returning, she had a sinking feeling in the pit of her stomach. “I knew there was only one reason she had returned,” says the manager of a big-box retailer. Unfortunately, Jean’s gut instinct was right: The customer had fallen victim to gift-card fraud, and the $3,000 in gift cards she’d purchased the day before was now gone. “It makes me feel physically ill to think about how much money she lost altogether because she also bought gift cards at two other nearby stores,” says White.
White’s customer is hardly alone. According to the Federal Trade Commission, gift-card scams doubled from 2015 to 2017, with reported losses of up to $40 million. “Scam artists are inventors and are always finding new ways to propagate a new scam, and gift-card scams are the latest and greatest scam we’re seeing today,” says Darren Guccione, CEO of Keeper Security. “They’ve definitely grown in the past 12 months, and they’ll continue to be propagated through the end of the year, because it’s the holiday season.” The reason for their popularity, explains Greg Mahnken, credit industry analyst of Credit Card Insider, is that gift cards are treated like cash. “Unlike with other cards associated with a particular issuer network—where you can track down where it’s been spent and you can shut it down—gift cards are anonymous,” he says.
Here are the three main types of gift-card scams, and how to protect yourself. And make sure you also read up on these other gift card scams to watch out for.
“The common theme with gift-card scams is a sense of urgency,” says Mahnken. The caller will impersonate a government official—IRS, Social Security—with urgent news: you owe back taxes and are about to be arrested if you don’t pay it now via gift card. Or your identity is compromised and they need your help—via, you guessed it, gift cards—to track down the culprit. Sometimes, the scammers will even use a personal avenue to pull at your heart—and purse—strings. “They go on social media, see who you’re connected with, and prey on that,” explains Guccione. “This happened to a friend of mine where his grandmother thought he had asked her for $3,000 in gift cards from Walgreen’s—somehow, it’s typically $3,000 they will ask for—and she thought it was him, and got scammed.” Learn more about the top 10 phone scams.
Tech support scams
Another type of gift-card scam happens because of simple misspellings that not even spellcheck will catch. It happens to us all: You mistype one letter when entering in a website address, and it takes you to the wrong website. Not a big deal…unless a scammer has taken over that particular website. “Scammers will poach on misspellings of websites, and you’ll get a big pop-up error message that will take over your screen, and let me tell you, it can look very convincing and can easily create panic,” says Mahnken. “They’ll say there’s a virus on your computer and ‘contact Microsoft support immediately’ for example, with a phone number. If you call it, you’ll reach a phony tech support person who will try and sell you malware to remove a virus, and they will ask for payment through a gift card.” Scams through email abound; discover the main forms of online scams.
Here’s another: You get an email from your busy boss, asking you to go out and buy gift cards for a client. “I’m rushing to the airport, can you pick these up today for a client?” type of thing. Sounds legitimate, especially during the holidays, right? Not necessarily, says Guccione. “This actually happened to our company, whereby an employee got an email posing as me, asking him to purchase thousands of dollars in gift cards, and he called me from Walgreen’s and said ‘I just want to confirm that you want me to purchase these,'” he recalls. “Luckily, our team members are trained to call and verify any request for funds, so we were able to prevent the scam. But it can be very convincing, because they create the email to look exactly like it’s coming from within your company.” (And if you’re ever mailed a gift card, look twice: it could be a scam.)
3 ways to protect yourself
Verify with the source. If Guccione’s employee hadn’t called him to verify that he was actually the one who sent the email, his company would have lost thousands of dollars. “If someone emails you and asks you to buy gift cards, don’t answer it,” he suggests. “Don’t reply, and don’t click on anything. Instead, go directly to the source to verify.”
Hang up. Take that example of the call from the IRS: “Even if you believed everything else you heard in the script and you’re really scared, just remember that no government agency will ask you to pay with a gift card, nor will they communicate with you via phone,” says Mahnken. “Just say ‘listen, let me call you back on your main number’. Don’t be afraid to hang up and close that line of conversation, and if you really thought it was a real agency, call them back on their real number. That way you know you’re talking to the actual business that these scammers are claiming to be.” If they do give out a phone number, Google it first before calling back. If it’s the official toll-free number of the IRS, it will come up in the search results.
Tell someone about it. The phone scammers will try stay on the phone with you, even while you’re purchasing the gift cards, in order to see the transaction through. That’s what happened to White’s customer, she says. “As I was warning her of scams, which we do for any larger purchase of gift cards, she was assuring me that she was buying these gift cards for her grandchildren for Christmas,” she says. “Meanwhile, the scammer—who had scared her into thinking her identity was in jeopardy—was on her phone, which was in her purse.” White has since made up laminated cards to hand out to customers she suspects may be falling victim to a scam. The card informs them that they could purchasing cards for a scam and to hang up if they are on the phone with anyone. Even if you fall for a scam, it’s important to report it, says Mahnken. “Speak up, because there can be a fear of being embarrassed that you fell for it, and that can lead you to get duped again,” he says. “Tell the authorities and file a police report instead, because that will help stop this epidemic.”
*not her real name