Gift cards have become a multibillion-dollar industry, and social distancing has not slowed its growth in usage. Worldwide, consumers spent billions on gift cards last year. However, that total it includes the gift cards on which scammers increasingly rely to extract payment from their victims.

An in-depth investigative study by the Better Business Bureau (BBB) finds an increase in reports of scams involving gift cards, with hundreds of millions of dollars in losses over the last few years. The study looks at the scope of fraud involving gift cards as a payment method, the way various cards work, the scammers who exploit them, the efforts to combat the scams and the steps that the industry can take to further tackle this scourge.

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 impersonatorsbusiness email compromise fraudstech support fraudsromance scamsfake check scamsprize/sweepstakes scams, and online sales of nonexistent vehicles.

The losses reported to BBB Scam Tracker for gift card payment types 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.

“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,” said Mechele Agbayani Mills, President and CEO of BBB Serving Central East Texas. “If you’re asked to make payment via gift card for whatever reason, you are likely dealing with a scam.”

How the scam works:
The scammer instructs the consumer to buy a gift card — or several — and either requests the numbers on the back. If victims ask questions about why gift cards are being used for payment, scammers invent a plausible excuse. The scammer may also 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.

Prevent falling victim to a gift card scam by applying the following:

  • Watch out for “government agencies” or any organization requesting payment via gift card. No government agency or legitimate company requests money through gift cards.
  • Never provide gift card numbers on the back of the card for payment. Providing the number is like sending cash, once it’s gone, the money is rarely recoverable.
  • Keep the receipt and the physical card. 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.

If you become a victim:

  • Notify the organization that issued the card. There is typically a customer service number on the back of the card.
  • Contact your local BBB if you lost money or report a scam online at BBB.org/scamtracker.
  • Contact the FTC  at FTC.gov or call 877-FTC-Help.
  • Contact the Internet Crime Complaint Center (IC3) at IC3.gov/complaint.
  • Contact the Consumer Financial Protection Agency at ConsumerFinance.gov/complaint or call (855) 411-2372.

To read the full study, go to bbb.org. To report fraudulent activity or unscrupulous business practices, go to BBB Scam Tracker.

ABOUT BBB®: BBB is a nonprofit, business-supported organization that sets and upholds high standards for fair and honest business behavior. Most BBB services to consumers are free of charge. BBB provides objective advice, free BBB Business Profiles on more than 5.3 million companies, 11,000 charity reviews, dispute resolution services, alerts and educational information on topics affecting marketplace trust. Visit bbb.org for more information. There are over 100 local, independent BBBs across the United States, Canada and Mexico, including BBB Serving Central East Texas, which was founded in 1985 and serves 19 counties.