Gift card fraud is the unintended gift that keeps on taking

Gift cards remain among the top gifts each holiday season — 56% of consumers said they planned to give them this year, according to a National Retail Federation survey — making them excellent (and frequent) targets for fraudsters. Here’s what card givers and recipients need to do to protect their money and identity.

Spot the scams

Gift card fraud comes in many packages. Well-known scams to watch out for include:

• Thieves take gift cards from store displays, write the numbers down and put the cards back. They wait for others to purchase the cards and then use the balances themselves.
• Sellers list counterfeit or stolen cards on auction websites or community marketplaces such as EBay and Craigslist.
• Shoppers go to make a purchase online or over the phone and the seller accepts only Amazon, iTunes or other gift cards as payment. A legitimate business will never insist on customers paying with gift cards.
• Advertisements, calls, texts or emails claim you’ve won a free gift card.
• Someone reaches out to you pretending to be from the IRS or a utility company and demands you pay a fine or bill with a gift card.

Know the safeguards

Despite the possible dangers, many experts say gift cards make safer gifts than cash.

“There is some tracking available, especially if you buy the gift card online,” said Shelley Hunter of GiftCards.com.

Transaction receipts and email records contain vital information including the date and time stamp, gift card number and the debit or credit card used to make the purchase. If the gift card is lost or stolen, but you have proof of purchase, customer service may track down the card or issue a replacement.

“That can’t happen if you just have a $20 bill,” Hunter said.

Registering the gift card online can help fast-track the process. Not all merchants offer this feature, but some, including Disney and Subway, do. If you’re dealing with a gift card from a financial service company such as Visa or MasterCard, “you can dispute those [fraudulent] charges just like if it were a credit card,” Hunter said.

Protections may vary from gift card to gift card, so read the terms and conditions carefully, said Juliana Gruenwald Henderson, a Federal Trade Commission spokeswoman. This will also help inform you of any card usage or inactivity fees.

Follow basic safety tips

Take advantage of helpful company policies and assistance.

For gift card buyers:

• Purchase gift cards from trusted companies. It’s best to buy directly from retailers. Purchasing gift cards secondhand at a discount might be tempting, but not all resellers are reliable. If you decide to buy from a reseller, Hunter recommends picking one that is backed by a reputable company, offers a money-back guarantee and has a customer service department.
• Inspect the card before you buy it. If you purchase a gift card in person, make sure the packaging hasn’t been tampered with. Don’t buy it if the PIN is exposed.
• Hang on to your receipt. This verifies ownership in case something goes wrong. If you’re worried about losing the receipt, take a picture.

For gift card recipients:

• Register your gift card. This can help you and customer service easily identify the card and monitor its activity.
• Keep it in a safe place. Treat the gift card like cash. Rather than tossing it on the table or into a desk drawer, put it in your wallet next to the cards you use most often, Hunter says.
• Use it quickly. Many cards don’t expire, but the longer they sit, the more vulnerable they become to theft and the more you’re likely to forget about them.
• Be careful where you shop. Don’t use gift cards anywhere a seller demands them as payment.

What to do if you fall victim

If you lose the gift card or think it’s been compromised, immediately alert the issuer.

“There is no guarantee consumers will get the funds back, but if it has not yet been used, the company may be able to help you get a replacement,” Gruenwald Henderson said.

Then, file a complaint with the FTC. You can do this online at ftc.gov/complaint or by calling (877) FTC-HELP. The agency may not solve your problem, but it can offer advice, investigate and share details with law enforcement.

Lauren Schwahn is a writer for NerdWallet, a personal finance website.