For criminals, gift card scams are a preferred way to steal your money.
A gift card can be the perfect present for almost anyone. It has the personal touch lacking in a cash gift, without the fear of giving something unwanted or unneeded. A few general categories of gift cards are especially popular. Peddlers of gift card scams know exactly which ones they are.
What’s more, gift cards are convenient. For that reason Americans purchased an incredible $160 billion worth of them in 2018. And it also explains why gift cards are requested as payment in four out of every five imposter scams.
Gift cards generally fall into three categories. There are popular gift cards for online services, such as Amazon, Apple, eBay, Google Play, MoneyPak, and Steam. Then there are gift cards for major brick-and-mortar retailers such as Ikea, Walmart and Target. Finally, there are Visa and Mastercard prepaid gift cards, which operate like debit cards.
All gift card issuers advertise them as being “easy to give” and “fun to receive.” Of course, they’re especially fun to receive if you’re a scammer. And it’s all due to the fact that once the scammers use them, the transactions are irreversible. According to the U.S. Federal Trade Commission (FTC), “anyone who insists that you pay by gift card is always a scammer,” period.
How Do Gift Card Scams Operate?
Scammers phone victims at random and demand payment either for their supposed debts or those of their relatives. These supposed debts are typically for hospital, telephone or utility bills, bail, or back taxes. For many years wire transfers were the payment vehicles that scammers preferred. Increased awareness among consumers, however, encouraged scammers to look for new avenues. As a result, they moved into gift cards. As Apple warns on its website:
“Regardless of the reason for payment, the scam follows a certain formula: The victim receives a call instilling panic and urgency to make a payment by purchasing Apple Gift Cards, App Store & iTunes Gift Cards, or Apple Store Gift Cards from the nearest retailer (convenience store, electronics retailer, etc.). After the cards have been purchased, the victim is asked to pay by sharing the code(s) on the back of the card with the caller over the phone.”
To underscore its concern over the widespread success of these scams, the U.S. Treasury Department published an alert. It warns that fraudsters, impersonating Internal Revenue Service (IRS) and Treasury Department officials, are demanding payment for supposed back taxes or fees. They don’t ask for payment by check, credit card, cash, or wire transfer, however. They request it in gift cards.
The FTC issued its own warning. It notes that scammers, posing as tax collectors, often threaten their victims with arrest if payment is not made immediately. In addition to gift cards, scammers also may demand payment using other gift programs, or even PayPal, Western Union or MoneyGram.
Gift Card Scammers Are International
This is not just an American phenomenon. Gift card scammers are international and multinational.
The Australian Consumer and Competition Commission reported that 1,236 people, predominantly elderly, lost almost AU$480,000 to iTunes gift card scams in 2015 and 2016. Estimated losses in December 2017 reached AU$100,000. The scammers typically told victims that they were representatives of the Australian Tax Office.
In New Zealand, one 81-year old woman lost thousands of dollars in January 2018. To gain her trust, the scammers, who claimed to be calling from a government agency, transferred NZ$1,000 into her bank account, supposedly as a grant. Afterwards, they promised her an additional NZ$6,000 in exchange for NZ$5,200 in iTunes gift cards, which she purchased for them. They spent her money within six days.
Another New Zealand retiree, an 88-year-old woman, was luckier. A supermarket clerk assumed something was fishy when she requested to buy an unusually large amount of iTunes gift cards and alerted her that it might be a scam. It turned out that it was. The scammers who targeted her told her she was due NZ$6,000 in back pension, which would be transferred to her on condition that she first provide them with NZ$1,200 in gift cards.
In the U.S., FTC statistics show almost $80 million was lost to gift card and reload card scams in the first three quarters of 2020 alone. In 2019, there were $102.9 million in reported losses, $78 million in 2018 and $39.7 million in 2017. With the success of this type of scam, it unfortunately looks like it will be around for years to come.
If you think you’ve been the victim of a gift card scam, contact the fund recovery experts at MyChargeBack.