Man loses $500 in gift card draining scam: What is it and how can you avoid it?

CHARLOTTE, N.C. (WBTV) - A Gastonia man called WBTV for help after buying two gift cards, only to find out they had been drained by scammers.

Mike Tweed thought he found the perfect Christmas present for his niece at a CVS in Gastonia.

He put $250 on two Visa Vanilla gift cards. Months later, his niece went to use them and was told they each had a balance of $0.

“She brought it to my attention that she just tried to use these gift cards and they were declined,” Tweed said. “It was brought to my attention when I was buying these, that there was a lot of fraud with these gift cards.”

Gift card draining has been a problem for several years. According to the Federal Trade Commission, gift card scams accounted for $217 million lost in 2023.

Earlier this year, Visa was sued in connection to the fraud happening with their Vanilla gift cards.

Gift card expert and consumer advocate Shelley Hunter said scammers can steal money quickly and without the cardholder’s knowledge.

“They’re taking these gift card numbers [and] once they have access to them, they will check the balance of the gift cards and wait for money to be loaded,” Hunter said. “As soon as it’s loaded, they’ll use it themselves.”

Tweed said the cashier at CVS even inspected the cards thoroughly and told him they did not appear to have been tampered with.

“They’ll do a whole bunch of things, including put on stickers over the top of pins, or you know, they might heat a gift card to release the glue from it so that they can get access to the gift card inside and then put it back together,” Hunter said.

Tweed said his niece confirmed the security codes were visible when she went to use the cards.

“So obviously [they] had been scratched off and compromised already, but she didn’t know,” he said.

Tweed immediately contacted CVS to get his money back.

“They said you need to take this up with Visa because that’s what the card is,” he said. “So I called Visa and Visa claimed no responsibility in this process. They said you need to take it up with the banks that issue these cards.”

Once Consumer Investigator Caroline Hicks contacted CVS, they investigated the claim and said they would issue Tweed a refund.

“Gift card and prepaid card scams are a challenge to all retailers,” a spokesperson for CVS said. “We regularly alert our store teams about gift card scams and recommend our employees check their gift card racks daily for tampered cards. We take several steps to protect these products in-store and educate colleagues and customers about fraud risks. We also have signage on our gift card racks warning customers about potential gift card scams.”

Below are tips for shoppers who are worried about purchasing tampered gift cards.

• Inspect the barcode on the gift card before buying it. If it can be peeled off, it’s fake.
• Ensure the barcode printed on the gift card matches the bar code printed on the gift card packaging.
• When the gift card barcode is scanned by the cashier, the type of gift card displayed on the cash register should match the card itself. If it doesn’t, cancel the transaction.
• If anything appears suspicious about a gift card, notify the store manager immediately.
• Keep receipts. This will help file a police report for those who think they have purchased a fraudulent gift card.

Tweed said he believes retail stores are not doing enough.

“I think they need to be behind the counter,” he said. “They need to be under lock or glass or something that protects these codes.”

Hunter is also pushing for stricter regulations to protect consumers.

“I think it’s time for us to start connecting card numbers to the customer who purchased them,” she said. “It won’t stop the scams entirely, but it will make it easier for stores and businesses and even law enforcement to know who victims are and who can help them solve this problem.”

When buying a gift card to a specific store, Hunter suggests purchasing it directly from that store, rather than a large retailer. When buying a bank-issued gift card, she recommends buying it online or directly from the bank.

She also suggests holding onto purchase and activation receipts.

Anyone who believes they are a victim of a gift card draining scam, should report it to the Federal Trade Commission here.

WBTV contacted Visa for comment, but did not receive a response.

Gastonia Police confirmed they are aware of the issue and urge consumers to be cautious about purchasing gift cards in open forums.

Related: Officials warning of gift card scam as holiday shopping ramps up

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