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Scammers are stealing billions through gift card scams: Here’s how they do it

Why you should never buy anything (except a gift) with gift cards

Updated:

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By:
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Mark Huffman
Reporter

Mark Huffman has covered consumer issues since 2004, with a special focus on protecting and empowering older adults. A former news correspondent for the Associated Press Radio Network, Westwood One, and ConsumerAffairs, Mark brings decades of journalistic experience to RetirementLiving.com. He is passionate about giving consumers a voice and helping them make informed decisions. Mark has also created educational content, including Senior Scam Alert, a video resource designed to help seniors recognize and avoid fraud. He holds a B.A. from the University of Kentucky and lives with his family in Richmond, Virginia.
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Key Insights

  • Gift card scams cost Americans more than $200 million annually, according to the Federal Trade Commission.
  • Criminals often pose as government officials, tech support, or loved ones in distress to pressure victims into buying cards.
  • Victims are instructed to share the card numbers and PINs, giving scammers instant, untraceable access to the funds.

Gift cards, a convenient way to give someone a flexible gift, have become a favorite tool for scammers. They have taken the place of Western Union wires transactions.

Criminals exploit the anonymity and speed of these cards, which can be purchased almost anywhere and used like cash without oversight. The Federal Trade Commission reports that gift card scams consistently rank among the top forms of consumer fraud, with losses climbing steadily each year.

Typically, the scam begins with a call, text, or email from someone claiming to represent a trusted institution. They might say you owe back taxes, that your computer is infected, or that a family member is in urgent trouble. The message is always the same: act now, pay quickly, and don’t tell anyone.

Once victims agree to pay, the scammer instructs them to buy gift cards, often from major retailers like Apple, Target, or Walmart, and then send the card numbers or photos of the codes. Within minutes, the funds are gone, transferred or resold through online marketplaces.

Why gift cards appeal to scammers

Unlike wire transfers or credit card payments, gift cards leave no meaningful paper trail. Once redeemed, the money is nearly impossible to recover. 

The cards’ popularity and accessibility make them ideal for fraudsters who rely on quick, untraceable transactions. Some even use bots to harvest card balances in bulk, laundering stolen funds through digital resale sites.

Victims range from retirees to tech-savvy professionals. In one widely reported case, a 76-year-old man in Ohio lost $18,000 after receiving a fake IRS call demanding immediate payment through Target gift cards. “They told me if I didn’t do it, I’d be arrested,” he said. “It felt real.”

How to protect yourself

Consumer advocates recommend following a few simple rules:

  • Never pay anyone with a gift card. No government agency or legitimate business accepts them as payment.
  • Check balances before buying. Some scammers tamper with cards on display racks.
  • Report scams immediately to the retailer and the FTC’s fraud reporting system.

As the holiday season approaches – when gift card purchases surge – consumer advocates warn that vigilance is key. “If someone demands payment in gift cards,” said an FTC spokesperson, “it’s a scam—every single time.”