Peter Funt: The growing gift card racket

Published 11:00 am Wednesday, March 12, 2025

My wife Amy purchased a gift card for our daughter at a large retailer of beauty products, but all she got was disappointment. When Stephanie tried to use it the clerk informed her the card had a $0 balance. No money.

It seems gift cards — growing rapidly in popularity — are increasingly subject to scams. Consumers lost more than $250 million in gift card fraud last year, with such cases representing 25% of all Federal Trade Commission complaints.

That’s a fright for many of us who are used to the convenience of gift cards, which are sold not only directly through stores, but also in supermarkets and pharmacies. Gift cards for hundreds of outlets are handled by thousands of unaffiliated retailers. It’s estimated that fully half of all Americans have at least one gift card in their possession at any given time.

This month, seven men were arrested in New York state in a $20 million gift card scheme. “This is one of the largest money laundering cases my office has prosecuted in my time as district attorney,” said Nassau County’s Anne T. Donnelly.

A few weeks earlier, the Department of Homeland Security announced that it was “teaming up with federal, state, tribal and local law enforcement to identify, disrupt and dismantle Chinese organized crime groups engaged in gift card draining scams.”

According to federal officials, here’s what all-too-often happens.

Organized crime groups hire “takers” who steal unactivated gift cards from stores. The takers send the cards to colleagues known as “tamperers” who manipulate the packaging to gain access to the gift cards’ sensitive information. “Placers” put the repackaged cards back in stores, often in high-traffic locations.

The crime group’s “checkers” use tools, such as balance inquiries, to monitor when a consumer buys and loads funds onto the card. Once the card is funded and activated the checkers quickly transfer the funds into accounts in their control. The illicit gains are then spent on high-value products that are shipped overseas to be re-sold.

Maryland recently became the first state to pass a law specifically addressing gift card fraud.

If you do purchase a gift card, the sooner it’s used, the safer it is. Also, paying with a major credit card offers some protection.

It would be nice if retailers took the matter more seriously, rather than chalking up gift card fraud to the inevitable cost of doing business in these twisted times.

Peter Funt’s latest book is “Playing POTUS: The Power of America’s Acting Presidents,” about comedians who impersonated presidents.