Protect Yourself from Gift Card Draining Scams

Understanding Gift Card Draining: What It Is, How It Works, and How to Protect Yourself

Many of you are probably buying and receiving gift cards this holiday season. They’re convenient and easy.  Unfortunately, they’re also a major target for scammers. One particularly sneaky scam is called Gift Card Draining. Let’s explore what it is, how criminals pull it off, and most importantly, how you can avoid becoming a victim.

What Is Gift Card Draining?

Gift card draining is a type of fraud in which thieves steal the value from a gift card, often before the legitimate buyer or recipient even gets a chance to use it.

• Sometimes fraudsters remove inactivated cards from store shelves, record or photograph the card numbers and PINs, then place them back on the rack. 
• Once someone buys and activates the card at checkout, the scammers monitor the card online and as soon as it’s loaded with value, quickly spend or transfer the funds; leaving the real buyer with a zero-balance card. 
• Because the tampering can be subtle (sometimes just a barcode sticker is replaced or the package is resealed), unsuspecting buyers frequently have no idea the card was compromised. 

That’s the essence of “draining”. The card works fine at purchase, but is emptied behind the scenes before the rightful owner can use it.

How Gift Card Draining (and Other Gift Card Scams) Work

Here are the most common methods fraudsters use:

• Shelf tampering/card-number theft
  • They remove unactivated gift cards from displays, record the number and PIN, and then repackage or reseal the card and return it to the shelf. 
  • When the card is later activated by a legitimate buyer, the scammer drains it remotely. 
• Fake stickers or swapped barcodes
  • Sometimes scammers apply a sticker with a fraudulent barcode over the real barcode, so when you buy and activate the card, you're actually activating the scammer’s card. 
• Phony online stores and payment-demand scams
  • Scammers set up bogus online shops that accept only gift cards as payment. Once you pay with the card number and PIN, you get nothing and the scammer walks away with the balance. 
  • Other variants: scammers posing as government officials, debt collectors, or tech support demanding payment by gift card. 
• “Pay with gift card” pressure tactics
  • Because gift cards are hard to trace or refund, scammers often pressure victims to pay with them and once given the information, they immediately drain the value. 

How to Protect Yourself: Practical Prevention Tips

Given how sneaky these scams are, a bit of caution goes a long way. Here’s how you can minimize risk:

• Buy gift cards only from reputable retailers: Ideally, buy directly from the store or a trusted online seller. Avoid third-party sellers, unopened cards from unknown sources, or deeply discounted gift card offers. 
• Inspect the gift card packaging carefully before buying: Run your finger over the back to check for suspicious stickers, tampering, or signs that the barcode/PIN area has been altered. If anything seems off, choose a different card. 
• Avoid paying anyone with a gift card: This is especially if the request comes out of the blue (e.g., for taxes, utilities, fines, services, or “urgent” debt). Legitimate businesses or agencies won’t ask for gift cards as payment. 
• Treat unexpected or unsolicited “promotions” with skepticism: If someone messages or calls claiming you’ve “won” a prize or needs payment via gift card, it’s almost certainly a scam. 
• If you suspect a scam, report it: In addition to contacting Monterra Credit Union, contact the gift card issuer immediately, and file a complaint with the Federal Trade Commission (FTC), or the Internet Crime Complaint Center (IC3). Some issuers may be able to freeze or refund unused balance, especially if you report promptly. 

Key Takeaways

• Gift card draining is a real, rising threat: Fraudsters steal or copy card information before purchase, then drain the balance once the card is activated.
• The scam works because gift cards are often untraceable and can be emptied without detection.
• You can protect yourself by buying only from trusted retailers, inspecting packaging carefully, never using gift cards to pay third-parties, and reporting any suspicious activity immediately.
• 2025 legislation in many states is closing loopholes and giving law enforcement tools to fight gift card fraud on a broader scale.

By staying alert and following some simple precautions, you can still enjoy the convenience of gift cards this holiday season and throughout the year without handing your money over to scammers.

Remember, if you suspect that you’ve been targeted or may be a victim of a scam, call us directly at (650) 363-1725 or stop by your nearest branch. You can also visit our Fraud & Security Center and the Department of Financial Protection & Innovation for more information.