Gift cards are a multibillion dollar industry, and with less cash being exchanged during the COVID-19 pandemic, gift card use has grown in the past year.
Better Business Bureau says in 2020, consumers worldwide spent billions on gift cards, with hundreds of million of dollars in losses over the last few years.
The study “Gift Card Payment Scams: BBB Reveals Why Scammers Love Gift Cards” takes a look at the scope of fraud involving gift cards as a payment method, how various cards work, the scammers who exploit them, the efforts to combat the scams and the steps the industry can take to tackle the problem.
The full BBB study can be found below:BBB-Gift-Card-Payment-Scams
BBB says available data suggests gift card payment scams are growing fast, with losses reported to BBB Scam Tracker having tripled between 2017 and 2020.
The median loss was $700 last year.
Consumers over 65 were more likely to lose money than younger ones.
A woman from Springfield in her 80’s 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 to protect her data and tell any cashier who questioned the transaction that they were gifts for grandchildren.
The woman 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.
BBB says these are red flags to know and avoid:
- 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 provide 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 they can take the money when the card is later activated.
BBB’s report also recommends the Federal Trade Commission should consider amending the Telemarketing Sales Rule to prohibit payment with gift cards, and the industry should continue to educate the public about the potential pitfalls of gift cards.