The deal sounded sketchy to Axel Halvarson of Providence, Rhode Island. But coaching cheerleading part time for a college wasn't quite paying the bills, so he buried his doubts about a job opportunity sent by email.
He was told he could get paid for checking out the quality of retail operations at an Apple Store.
Halvarson was sent a check for $3,000, deposited it and, as instructed, bought $2,600 worth of gift cards at an Apple Store using his debit card. The remaining $400 was to be his wages — except the check bounced.
Before he realized it was all a ruse, Halvarson had sent scammers the card and PIN numbers for two $1,300 gift cards. So instead of landing a second job, he lost $2,600. “I'm still freshly out of school and getting by,” says Halvarson, 24. “That's a good chunk of change."
Halvarson has plenty of company — and his misfortune is a cautionary tale as the busy holiday shopping season kicks off.
Three-quarters of the way into 2019, $74 million has been reported lost in scams involving gift cards and reload cards, according to the Federal Trade Commission (FTC). Reported losses for all of 2018 were $78 million, up from $40 million a year earlier.
Gift cards are a leading payment method for scammers. As carrels of cards grew like weeds in stores, criminals realized they were an easy way to rake in money that's untraceable. The FTC has cracked down on wire-transfer fraud, and consumers have gotten smart about not giving out their credit card numbers to strangers, contributing to the rise of cards as a favorite for rip-off artists.
Gift cards now are being used in many scams: to make amends with the “Internal Revenue Service” for back taxes, to send funds to “grandchildren” who assert they've been in an accident and need help, to purchase “tech support” for imaginary computer problems and to pay “Social Security” to remedy supposed identity-theft problems. Except the purported recipients aren't real — they're all crooks, some part of criminal networks.
Gifts cards not meant for payments
"If someone is asking you to put money on a gift card to pay them, it's a scam,” says the FTC's Patti Poss, a senior attorney in its Division of Marketing Practices.
It's easy to second-guess how someone can fall for these ruses, but criminals are very persuasive, says Amy Nofziger, AARP's director of fraud victim support. They can keep victims on the phone to prevent them from getting an objective view from a trusted friend. Some even convince victims that they are about to be arrested for unpaid taxes and tell them exactly what cards to buy, usually iTunes, Google Play, Amazon or Steam.
"Your blood pressure goes up, your adrenaline starts rushing and you think, I have to do whatever it takes to get out of this situation,” Nofziger says.
"It doesn't matter your educational level or your financial level, we all can be put under that emotional ether to be victimized."
Once a victim reads a gift card number and PIN over the phone — or sends a digital photo of the numbers — a criminal can immediately spend the funds online or sell the data on the dark web. Some crooks don't wait for a photo; they keep the victim on the phone until the numbers are read to them.
Three tips to avoid gift card scams
- Use gift cards only as gifts for people you know — and never for payments.
- Legitimate businesses and government agencies will never demand payment in gift cards.
- If your religious leader, grandchild or anyone else calls or emails and asks for money, first call them back to make sure it’s really them.
Many retailers are training clerks to help customers avoid traps. At CVS, for instance, a message pops up on credit card payment screens warning people that prepaid cards are used in scams.
Target spokeswoman Danielle Schumann says the retail giant works with law enforcement and has a website to educate consumers about common scams. “We are aware of the prevalence of scams like these and take them very seriously,” Schumann says. “We have signage in our stores and share general safety tips with our team members through training, so they can stay alert and help guests as best as they can at our registers."
FTC officials say anyone who has been scammed should report it to them — at ftc.gov/complaint — to law enforcement and to the gift card company. You can find more information, including phone numbers to report scams to card issuers.
Even if a scammer is long gone with the proceeds of a crime, reporting helps officials understand what ploys are being used so they can educate people and prevent future losses.
Nofziger says too often victims don't report the crime. “They are embarrassed and ashamed and they don't think it does any good,” she says. “But that's how we know how big the problem is.”
Taking a look at fraud reports from people 60 and older during 2018, the FTC says these older Americans lost $29 million by turning over gift cards or reload cards, such as Green Dot's MoneyPak, to scammers. These kinds of cards were the second most frequent payment method, trailing credit cards, in last year's scams affecting the age group; by the second half of 2018 — and continuing into 2019 — they became the top method.