In a new study, the Better Business Bureau revealed that more people are reporting gift card fraud to its BBB Scam Tracker this year, a 50% increase compared to last year. As we enter the gift-giving season, these numbers could very well be headed higher.
Losses from scams involving gift cards tend to be much higher than most other payment methods, ranking third behind wire transfers and cryptocurrency. And the funds are nearly impossible to retrieve; in 2022, not a single consumer reported to BBB Institute that they recovered money sent in a gift card scam.
“The BBB report highlights a key element when using gift cards,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “Consumers should treat gift cards, both retail and general-use cards, like cash. If you wouldn’t give the person asking a large sum of cash, do not give them a gift card.”
Fraudsters have been increasingly posing as government agents in these scams. At least 15 reports to BBB since 2020 involve FBI impersonation, and Immigration and Customs Enforcement and the Department of Homeland Security impersonations were used for multiple scams as well. Another dozen pretended to be from Microsoft. Tech companies including Microsoft, Apple, and Google are popular gift card sources for scammers because they can purchase pricey items like computers then resell them. Millions of dollars are lost on these types of scams each year, according to Federal Trade Commission data.
A Success Story from Walmart
One of the companies that has made serious inroads against gift card fraud is Walmart. Since 2018, Walmart has been using a technology called Redemption, which contains an algorithm with “red flag” markers for gift card fraud.
Larry Lundeen, Senior Vice President of Global Security & Chief Security Officer at Walmart, told BBB those flags are confidential to prevent scammers from figuring out how to beat them, but said the program has been a success. They have been able to return almost $4 million to consumers who purchased Walmart gift cards as a part of a scam. And since 2018, when the company first began to receive an influx of calls related to gift card scams, Lundeen said reports have fallen by more than 50%.
Walmart wants others in the industry to follow its lead. “This is not a competitive space with others,” Lundeen told BBB. “By collaborating with other retailers, law enforcement and associations, we are working to mitigate this industry-wide issue.”
