8 Signs You’re Dealing With a Gift Card Scam

Gift cards are a booming billion-dollar industry — and a favorite target for fraudsters. Whether you’re a consumer purchasing a gift card or a merchant selling them, spotting the warning signs early is essential to avoid financial losses, chargebacks, and falling victim to fraud schemes. With the gift card market projected to hit $510 billion this year, it’s no surprise scammers are on the hunt.

For online shoppers and eCommerce merchants alike, understanding how to identify and prevent gift card scams is critical. Recognizing the red flags early can save you from unnecessary costs, stress, and fraudulent activity. Here are eight warning signs of gift card fraud, along with actionable steps you can take to protect yourself. 

Have you ever bought a gift card, only to find out later it has a $0 balance? This all-too-common frustration is often caused by scammers preying on gift card buyers. These criminals steal card numbers directly from store displays and monitor them closely. As soon as the card is activated at checkout, they quickly drain the funds, leaving the rightful buyer with an empty card. It’s a pervasive scam that can take all the joy out of giving or receiving a gift. To protect yourself, always inspect gift cards for signs of tampering before purchasing.

For shoppers:

• Only purchase gift cards from trusted sources — preferably behind the counter or online directly from the merchant. 
• Always inspect the card for signs of tampering, including scratched-off PIN areas or irregular stickers.

For merchants:

• Keep your gift card displays secure by storing them in locked cases, accessible only to employees when a customer is ready to make a purchase.
• Regularly monitor activation logs for any unusual activity, such as unauthorized access attempts, or anomalies that could indicate a potential security issue.
• Conduct regular inventory checks to spot tampered cards before they are sold.

Scammers often try to mask fraudulent gift card purchases by adding low-cost items (such as a $2 keychain or a pair of $5 socks) to their cart. Fraudsters use this tactic to make their transactions appear legitimate, allowing them to evade fraud detection systems, bypass manual reviews, and go undetected until the stolen funds are eventually flagged.

For shoppers: If you receive a small item in the mail that you didn’t order, check your credit card and order history immediately. It may have been paired with a fraudulent gift card purchase made using your payment details.

For merchants:

• Monitor transaction patterns where a small-value item is repeatedly paired with a large gift card purchase.
• Use AI-driven fraud detection to spot purchase masking tactics and flag unusual transaction behaviors.
• Require manual review for transactions where the value of the gift card far exceeds the value of the other items in the cart.

When someone tries to buy multiple high-value gift cards in a single transaction, they might be using a stolen credit card for quick cash-outs. For criminals, gift cards are an easy and fast way to convert stolen funds into untraceable cash or goods.

For merchants:

• Set caps on bulk purchases. 
• Require manual reviews for high-value transactions or ones with suspicious patterns.   

If someone contacts you claiming to be from the IRS, tech support, an employer, or even a family member and asks you to pay with a gift card, it’s a scam. Scammers often impersonate trusted figures to pressure victims into buying and sharing gift card details. They may claim you owe taxes, have a compromised account, or need to make an urgent corporate purchase for your boss. Legitimate organizations will never request payment through gift cards.

Fraudsters rely on urgency to push their scams, often saying you owe money, your account is at risk, or a loved one needs help. Don’t fall for it. Always verify the request independently before taking any action. 

For shoppers:

• Never send details of a gift card to anyone as payment. No legitimate organization requests this.
• Verify unusual requests by contacting the organization or manager directly.
• Never share gift card numbers or PINs via phone, text, or email.

For merchants:

• Train staff to notice distressed customers purchasing gift cards in response to scams and intervene.
• Educate employees about gift card scams and emphasize that they will never be asked to purchase gift cards, as such requests are almost certainly fraudulent.
• Educate staff on common fraud tactics and encourage them to report suspicious activity.

Scammers will create fake websites that appear to sell discounted gift cards, luring in unsuspecting shoppers with deals that seem too good to be true. These gift cards are frequently either empty, stolen, or entirely invalid, leaving buyers out the money they spent with nothing in return.

For shoppers:

• Avoid too-good-to-be-true deals and only buy gift cards directly from the retailer.
• Always verify the legitimacy of a website before making a purchase to avoid falling victim to these schemes.

For merchants: Monitor for websites fraudulently using your brand to sell fake gift cards and report them promptly.

Scammers will use stolen credit cards to purchase gift cards, as these are easy to redeem quickly before the unauthorized transaction can be detected or flagged. Once the gift card is redeemed or sold, it becomes almost impossible to trace or recover the funds. This leaves merchants not only dealing with the financial loss of the gift card value but also facing chargebacks, which include additional fees and penalties. The result is a costly and frustrating situation for businesses and their customers, highlighting the importance of robust fraud prevention measures.

For merchants:

• Use fraud detection tools to monitor for high-risk transactions. 
• Add delays for digital gift card delivery to allow verification. 
• Require two-factor authentication or identity verification for bulk purchases.

Some scammers swap barcodes on physical gift cards so that when funds are loaded, they go straight into the scammer’s account. This means that when unsuspecting customers load funds onto the gift card at the store, the money is redirected straight into the scammer’s account instead of being added to the purchased card. This scheme often goes unnoticed until the victim tries to use the card and finds it empty.

For shoppers:

• Buy gift cards from behind the counter or locked cases whenever possible.
• Avoid gift cards with peeling barcodes, stickers, or any signs of tampering.
• Keep your receipt! If there’s an issue, some retailers can track the purchase and may offer a refund or replacement.

For merchants: Implement barcode verification systems to ensure funds are loaded onto the correct card at checkout.

Not all fraud comes from outside your organization. In some cases, employees with access to gift card systems take advantage of their position to commit fraud. In a recent case, an employee at a major retailer was investigated for activating gift cards without payment. Over just five days, the employee carried out this scheme more than 30 times, causing the company a $16,000 loss.

For merchants: 

• Audit gift card sales and redemption patterns regularly to detect suspicious activity. 
• Restrict access to systems that activate or issue gift cards, ensuring only trusted personnel have control. 
• Implement monitoring systems to flag unusual gift card transactions in real time.

For Shoppers

• Report fraud to the retailer that issued the card. 
• File a complaint with the FTC at reportfraud.ftc.gov. 
• Contact the card issuer to see if the funds can be recovered.

For Merchants

• Use fraud detection tools to continuously monitor for red flags. 
• Report suspicious employee activity internally. 
• Work with payment processors to identify trends in chargeback fraud.

Scammers target gift cards because they’re easy to cash out, resell, or use without a trace. Tactics range from using stolen credit cards, deploying bots to test card numbers, or tricking employees into handing over activation codes. And once a fraudulent gift card purchase goes through, it’s nearly impossible to recover the funds, leaving you stuck with the losses and chargebacks.

That’s where NoFraud comes in. Instead of leaving your team to manually review risky transactions, NoFraud’s advanced fraud prevention system catches scammers in real-time. It detects suspicious patterns, blocks high-risk purchases, and stops fraudsters before they can get away with your gift cards. Plus, with automated approvals and chargeback protection, you can prevent fraud without disrupting legitimate customers.

Want to keep scammers out and protect your revenue? Let’s talk — NoFraud has you covered. 🚀