October 26, 2018

Gift Card Scams on the Rise

Fraud Prevention

As you may already know, scammers utilize unique methods to prey on victims. Recently, the Federal Trade Commission (FTC) reported that gift card scams are on the rise. The FTC found that from January through September of 2018, gift cards and reload cards were stated as a payment method in 26% of the fraud reports, up from just 7% in 2017 - a 270% increase. As you can see, this form of fraud is definitely worth knowing more about.

Con artists favor these cards because they can get quick cash, the transaction is largely irreversible, and they can remain anonymous. Victims of this form of fraud reported that scammers directed them to buy gift or reload cards at well-known stores like Walmart, Target, Walgreens, and CVS. According to FTC reports, they demand specific card brands, such as iTunes cards.

Fraud reports available to the FTC from all sources found that losses where people reported using gift or reload cards reached $40 million in 2017, up from $20 million in 2015, and $27 million in 2016. Through September of this year, that number is already at $53 million.

Plus, when people report paying a fraudster with a gift or reload card, about four times out of five the fraud they report is an imposter scam. In fact, gift cards and reload cards are now the number one reported method of payment for imposter scams. These scammers pose as well-known businesses, family members, friends, or government agencies. They deploy various tactics to compel people to pay, such as pretending to be the IRS and telling people they cannot use other payment methods because of their delinquent tax status.

Familiarity with these tactics and awareness of the prevalence of gift cards and reload cards as a method of payment fraud may help people to recognize and avoid a wide range of scams. Remember, when someone demands to be paid with a gift card, that's a scam.

Information reported originally appeared on the Federal Trade Commission's news section.