Holiday gift card scams are rising, here’s how you can avoid them

The Grinch has evolved with the times and wants to steal holiday cheer with your gift card.

‘Tis the season for holiday scams, and this time fraudsters are looking toward gift cards for quick cash.

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For the 13th year in a row, gift cards have been the “most popular items on wish lists,” according to research from the National Retail Federation. It turns out that 59 percent of the consumers surveyed said they have requested gift cards.

Moreover, the NRF has projected that gift card spending will reach $27.5 billion for the holiday season, with 54 percent of shoppers purchasing at least one.

However, it is the popularity of gift cards that have put these well-meaning presents on thieves’ radars.

“Gift card scams are especially prevalent during the holidays because gift cards are an extremely popular present,” Ted Rossman, industry analyst of CreditCards.com, told FOX Business. “Besides being popular, gift cards are also common scam targets because they're much more anonymous than credit and debit cards.”

A gift card kiosk at a CVS/Pharmacy in New York.

Holiday gift card scams can vary in methodology, but the end result usually remains the same, with the recipient losing their funds. Eyal Benishti, chief executive officer of the cybersecurity startup IRONSCALES, shared with FOX Business the go-to ploys scammers use to swipe gift card money and how shoppers can avoid them.

1. Spammers posing as the IRS

Holiday scammers will resort to posing as the Internal Revenue Service or similar government agencies via a phone call, according to Benishti. “The fake callers claim that you owe money surrounding incorrect tax refunds,” he said.

If any of these random callers encourage the use of a gift card for an outstanding payment, it should be an immediate red flag since official government agencies do not offer these instructions.

The IRS has a dedicated page on its website that cautions taxpayers against gift card scams.

2. Online gift card fraud is a phishing attack

The age-old email phishing scam has gotten a sophisticated update that utilizes convincing social engineering. Holiday time is a prime season for scammer who targets businesses.

“The phishing email is crafted to appear legitimate, often signed by someone we know such as your boss asking you to buy a bunch of gift cards for clients or coworkers as a surprise and not to tell anyone,” Benishti explained.

“Scammers are using technology and the amount of personal information we put online to exploit us, something we have warned about regarding oversharing on social media for example.”

3. In-store gift card scams

Although many retailers encase their gift cards inside a thin cardboard that covers the pin number, Benishti said scammers have found a workaround by concealing a gift card’s bar code and replacing it with a bar code sticker of their own.

“When funds are added to the card by the retail cashier, the amount goes directly to the card of the fraudster,” he explained. It is imperative that shoppers check in-store gift cards for tampering before finalizing their purchase.

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4. Gift card balance bots

Technology has helped scammers get an edge, according to Benishti. “Software allows for scammers to target gift card balance websites using compromised data and bots. Gift card numbers, as well as PINs, are tried in an attempt to access gift card accounts online,” he said.

Once a gift card’s funds have been verified, a scammer will then sell the gift cards for a return. Benishti said this act can damage a store’s brand image and customer loyalty.

5. Balance check three-way

Although there are websites dedicated to reselling unwanted gift cards, scammers are leveraging skepticism to trick independent sellers. “A person lists a gift card for sale on a classified ads website. When an offer is made, the buyer asks the seller to confirm the balance on the card by calling the merchant in a three-way call,” Benishti explained.

“The scammer can acquire the gift card numbers you input with a DTMF decoder app or hardware if they are on the call with you the same way that call centers are able to read your keypad entries.”

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To minimize your chance of getting scammed, the Retail Gift Card Association advises shoppers to only purchase gift cards from trusted retailers and brands whether it be online or in store.