So, you’re planning on giving some gift cards this holiday season? Well, be careful, because what you end up buying may not be what you think.
Gift card draining is a scam that has wreaked havoc among consumers. Here's what to know.
What is gift card draining?
Here’s how it works: Someone steals a gift card and then copies the card number and security code before resealing it, making it difficult to notice it’s been compromised. When another person later purchases the card and puts money on it, the scammer then takes the money, or “drains” the card of its funds.
Weekend TODAY anchor and senior legal correspondent Laura Jarrett is a recent victim of the scheme. She bought $2,000 worth of Vanilla Visa gift cards at a CVS in New York City only to discover that three of the cards had scuff marks in the spot where the security code is meant to be and that the money was drained.
“All of the seals look totally fine,” Laura said in a TODAY story that aired Dec. 20. “In fact, it says on here if tamper evident, don’t purchase, so I checked it before I checked out. Everything looked good from the outside.”
One card that Laura had purchased looked completely fine, but the balance was zero when the money was taken two weeks after she had purchased it.
Laura is hardly alone. A 2022 AARP survey found that nearly one in four people have given or received gift cards that had no funds on them.
Gift card and reload card fraud cost $228 million last year, according to the Federal Trade Commission.
The Retail Gift Card Association and Vanilla Gift tell NBC News that thieves have become more adept and innovative when it comes to finding ways to drain cards. They also advise people to call police to report any fraud and call the number on the back of their cards if they are victims of draining.
CVS is also looking into the matter and cautions customers about the potential for fraud, while telling employees to monitor gift card racks to see if any cards have been abused.
How to avoid being a gift card draining victim
There are several steps you can take to reduce the chances you will become a draining casualty.
Some police recommend not buying a physical gift card. It’s virtually impossible to know which cards have been tampered with, and a virtual card eliminates that risk.
If you do purchase a physical card, buy one near the register or behind the counter in a store.
Gift card recipients should also check the balance and use the cards quickly to lower any risk.
When buying a gift card, use a credit card to make your purchase. That will boost the odds of getting a refund, if the need arises.
Drew Weisholtz is a reporter for TODAY Digital, focusing on pop culture, nostalgia and trending stories. He has seen every episode of “Saved by the Bell” at least 50 times, longs to perfect the crane kick from “The Karate Kid” and performs stand-up comedy, while also cheering on the New York Yankees and New York Giants. A graduate of Rutgers University, he is the married father of two kids who believe he is ridiculous.
Your first line of defense to avoid gift card scams should be to keep a keen eye out for any unsolicited texts, emails, messages on social media and calls from people you don't know, especially if they are offering something that is likely too good to be true.
Your first line of defense to avoid gift card scams should be to keep a keen eye out for any unsolicited texts, emails, messages on social media and calls from people you don't know, especially if they are offering something that is likely too good to be true.
Here's how it works: Someone steals a gift card and then copies the card number and security code before resealing it, making it difficult to notice it's been compromised. When another person later purchases the card and puts money on it, the scammer then takes the money, or “drains” the card of its funds.
The U.S. Department of Homeland Security has launched a task force to fight card draining. A 2022 report from AARP found that about one-quarter of U.S. consumers say they have either given or received gift cards that had been depleted of their funds.
Make sure the protective stickers are on the card and that it doesn't look like someone tampered with them. Also check that the PIN number on the back isn't showing. Pick a different gift card if you spot a problem and show the tampered card to a cashier or manager.
Keep the card number, expiration date, security code/PIN, customer service phone number, and account login in a safe place. Take a photo of the gift card and store receipt with your phone. This will ensure you have the numbers in case you have to report a problem.
Do not purchase a gift card if it appears that the packaging has been altered or manipulated. If you have questions about a gift card, ask a Target team member for assistance.
If you act quickly enough, the company might be able to get your money back. Be aware that some companies will not return any money even if the gift card hasn't been used. Remember to keep the gift card itself, and keep the gift card receipt. Also, tell the store where you bought the gift card as soon as possible.
Virtual gift cards eliminate the risk of a gift card being tampered with physically, which can keep you safe from gift card draining. Most online retailers offer the option to purchase virtual gift cards which can be sent to anyone through email.
Generally, Minton said gift card draining involves crooks who take gift cards off store racks, copy card numbers and security codes and then put the cards back. When a consumer loads money onto a compromised gift card, a thief drains the value. Using computer programming, Minton said draining can happen fast.
After purchases are made with a gift card, there may be a small amount of money left—which, if not used, ends up as money wasted. You may pay purchase or reload fees to add money. Closed-loop cards limit purchasing power.
Coming into contact with refrigerator magnets, clasps on wallets, and magnets on the back of tape measures and flashlights can demagnetize a credit or debit card. When you place your card in your wallet, but sure not to rub it up against the metal clasp and place it as far away from it as possible.
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