Gift cards scams are becoming increasingly common. Whether it’s a fraudster posing as a distressed grandchild, an employee from the Internal Revenue Service (IRS), or your financial institution, there’s no shortage of bad players trying to con people out of their money.
That’s why understanding the different types of gift card scams happening right now and learning how to spot the warning signs is so crucial. We spoke to Adrienne Vickery, Associate Vice President, Canadian Fraud Management at TD, about gift card scams and how to protect yourself and your loved ones from falling victim to this kind of fraud.
The reason why scammers request funds via gift cards is because they are incredibly hard to track. Once a gift card number and PIN is shared with a fraudster, they can access the funds on the card – and it’s difficult to know the identity of who cashed it.
“Gift cards are what we call an ‘easy depletion method,'" Adrienne said. "They’re a way for scammers to get money that’s not easily trackable.”
Types of gift card scams
The first step towards avoiding falling victim to a gift card scam is understanding some of the various types of cons circulating. Adrienne said that while a gift card scam can take many different forms, some of the more common ones include:
Bank investigator scams: You might receive a phone call from someone posing as an employee of your bank saying your account has been compromised and that they need your help with the investigation.
To encourage your participation, the scammer will ask for your personal banking information and say you will be compensated for the incident. Then, they might make deposits into your account through fraudulent checks or cash advances from your own credit card without you knowing. The fraudster will then ask for the money to be sent back to them, claiming it will be inspected as evidence in their investigation.
In some cases, the scammer will ask you to buy gift cards using the money they put into your account and ask that you give them the numbers on the back of the gift card. Once the scammer has the gift card numbers, they can access the funds on the card.
IRS scams: There are many ways people impersonate employees of the IRS and try to extract funds from unknowing victims. But one scam is the IRS gift card scam where fraudsters pretend to be an agent from the IRS on the phone, often calling from a fake number.
The fraudster might tell you that you owe money to the tax agency and demand your social insurance number and a payment in the form of gift cards.
Grandparent scams: The grandparent scam involves the fraudster calling a senior and pretending to be that person's grandchild. When the grandparent receives the phone call from the fraudster posing as the “grandchild,” the fraudster ensures they sound like they are in distress, claiming they need money for some type of emergency.
The scammer will often ask the grandparent not to tell anyone about the trouble they’re in, and to send money via gift card or other means.
Lottery scams: You might receive a call saying you’ve won a lottery prize, but to receive that prize, you need to pay a fee. Fraudsters might say this fee covers “taxes,” or “shipping and handling” charges, and ask for the fee to be paid via gift card. Once the “fee” is paid, the victim never receives their prize.
Romance scams: There are many forms of romance scams, but they often all include a fraudster posing as a romantic partner or love interest, before eventually asking their target for money.
These scammers often build relationships over time, either via social media, the phone or email, and play on emotions. Then, once they feel confident, they tell their victim they’re experiencing an emergency and need money in the form of gift cards.
How to spot a gift card scam
One of the most tell-tale signs of a gift card scam is a sense of urgency. If you’re being told that funds need to be sent immediately, or that a loved one is in trouble and needs your help or there will be consequences, chances are you’re being scammed.
“The scammer tries to convince the person to buy gift cards for an urgent situation, so the person doesn't have time to talk to their friends and family about the situation,” Adrienne said. “They think they need to act now and can get caught up in the moment.”
Another red flag is the fact that a purported organization is asking to be paid in gift cards in the first place. No legitimate organization, such as the IRS or a financial institution, will ever ask to be paid in gift cards. No reputable charity or business will demand payment in gift cards, either.
What to do if you think you’ve been scammed
It’s normal to feel embarrassed if you think you’ve been scammed – especially if you’ve sent a scammer a large sum of money via gift cards. But it’s important to report the suspected scam as soon as possible to help prevent other people from falling victim to a similar con.
Adrienne said you can reach out to the gift card issuer whom you bought the cards from to alert them of the fraud. In the chance the money hasn’t been cashed yet, they might be able to freeze the funds on the card. Usually, however, fraudsters cash the gift cards right away, but it doesn’t hurt to at least try to halt them in their tracks.
It’s also critical to alert your financial institution, local law enforcement and credit bureaus, such as Equifax and Transunion, if you have shared any financial information or personal information, like your Social Security number, with the fraudster.
The Federal Bureau of Investigations (FBI) tracks the scams that are happening across the US and encourages people to report any suspected fraud to its Internet Crime Complaint Center, or IC3, site. In 2022 alone, the IC3 received a total of 800,944 reported online fraud complaints, with losses exceeding $10.3 billion
Sharing stories and red flags
On top of reporting the scam to law enforcement, talking about your experience, or the experience of a loved one who was tricked, helps alert other people of the gift card scams happening in the country. The more awareness people have about gift card scams and their warning signs, the less likely they will fall victim to them.
And even if you haven’t been scammed, talking to your friends and family — especially those who are less tech savvy — about red flags arms them with knowledge. After all, many fraudsters prey on people’s vulnerabilities.
Adrienne said when in doubt, talk to someone you trust, like a loved one, about any suspicious calls, emails or text messages and remember that no credible organization or institution such as a bank, a business or a government agency, will ever ask for payment in the form of gift cards.
“If something doesn’t seem right, then it probably isn’t,” she said.
For more on personal finance topics
If you would like to learn more about how to protect yourself against fraud, visit TD Bank's Security Center.
If you have more questions about other personal finance topics that matter to you, visit the Learning Center on TD Bank’s website. You can find out more information about TD Bank's services at td.com.
We hope you found this helpful. This article is based on information available in December 2023 and is subject to change. It is provided as a convenience and for general information purposes only. Our content is not intended to provide legal, tax, investment, or financial advice or to indicate that a particular TD Bank or third-party product or service is available or right for you.
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