Card Draining: What You Need to Know Before Gifting Gift Cards This Holiday Season

As Christmas approaches, many shoppers turn to gift cards as the perfect solution for hard-to-shop-for friends and family. They’re convenient, thoughtful, and ensure recipients get exactly what they want. However, gift cards aren’t without risk, as scammers have developed a crafty way to drain the funds before they’re even used.

The practice, known as “card draining,” has become increasingly common, and it leaves gift-givers and recipients empty-handed. Here’s what you need to know to avoid falling victim this holiday season.

What is Card Draining?

Card draining occurs when scammers access a gift card’s details—such as the card number and security PIN—before it’s purchased. They often scratch off the security code on the back of the card, replace it with a sticker to make it look untouched, and wait. Once the card is activated at checkout, scammers use software to monitor the balance online and quickly spend the funds before the actual recipient can use it.

How It Happens

Scammers typically target gift cards on racks in retail stores. They’ll:

• Remove and tamper with cards, exposing the PIN.
• Use stickers or other coverings to hide tampering.
• Log the card number and PIN into automated systems to monitor when funds are activated.

In some cases, scammers use phishing emails or fake websites to convince recipients to share gift card details directly, claiming they need the information for “security” purposes.

Signs of a Tampered Gift Card

Before purchasing a gift card, inspect it closely:

1. Check the security strip. Look for signs of scratching, tampering, or replacement stickers.
2. Feel for irregularities. If the card’s back feels rough, it may have been altered.
3. Choose cards from secure displays. Cards located behind checkout counters or in sealed packaging are harder to tamper with.

How to Protect Yourself and Your Gift

To minimize the risk of card draining:

• Purchase directly from retailers. Buy gift cards from behind the counter, online through official websites, or stores with secure displays.
• Register the card immediately. If the card allows registration, set it up online to monitor activity.
• Keep your receipt. Treat it like a proof of purchase. In some cases, retailers can replace the funds if a card is drained.
• Avoid resellers. Be cautious of third-party websites or individuals selling discounted gift cards.

Upcoming Legal Protections

In response to the rise in gift card fraud, Maryland has enacted the Gift Card Scams Prevention Act of 2024, set to take effect in 2025. This pioneering legislation aims to curb card draining through several measures:

• Secure Packaging Requirements: Gift cards must be enclosed in tamper-evident packaging that conceals activation codes, making unauthorized access more difficult.
• Employee Training: Merchants are required to train employees on identifying and responding to gift card fraud, enhancing in-store vigilance.
• Consumer Warnings: Retailers must display notices warning consumers about potential gift card scams and advising them on appropriate actions if they suspect fraud.
• Record-Keeping by Resellers: Third-party gift card resellers are mandated to maintain detailed records of transactions for at least three years, aiding law enforcement in tracking fraudulent activities.

While this law currently applies only in Maryland, it sets a precedent that other states may follow, potentially leading to nationwide improvements in gift card security.

What to Do if a Gift Card is Drained

If you or your recipient discover the balance is gone:

• Contact the retailer immediately. Provide the card number, receipt, and any details about where it was purchased.
• Report the fraud. File a report with the Federal Trade Commission (FTC) at reportfraud.ftc.gov or with your local law enforcement.

A Note for Gift Givers

Gift cards remain a popular and thoughtful choice for the holidays, but staying vigilant is key to ensuring your gift gets into the right hands. Taking a few extra precautions can help you avoid this growing scam and ensure your loved ones get the gifts they deserve this season.

By staying informed, you can gift with confidence and keep the joy in the holiday season.