E-gift cards have become a popular and convenient way to send gifts, as it is simple and easy to do. Unfortunately, egift card fraud is happening more often as well, especially in the secondary market.
Many fraudsters sell e-gift cards purchased with stolen credit cards which can get deactivated once the fraud is detected. Scammers exploit buyers and sellers through stolen cards, PIN theft or card cloning, fake listings, and even balance-draining schemes. In online marketplaces, fraudsters use invalid or drained cards.
Consumers should be aware of this phenomenon to stay safe. We should learn the risks and the scheme operations of this e-gift card scam. Therefore, we can take prevention measures and will be able to protect ourselves against this scheme.
What is e-Gift Cards Fraud?
E-gift cards are the digital versions of traditional gift cards that can be purchased and can be sent to other people to be redeemed. How do e-gift cards work? Instead of a physical card, recipients will receive a code that can be used and redeemed electronically. E-gift cards function like cash and can be used to make purchases online or in-store.
Egift cards fraud is a scam where criminals or fraudsters use various tactics to steal money from consumers and businesses. Since e-gift cards work like cash and are often hard to track, they are a common target for fraudsters looking to commit theft.
The scams include selling drained or stolen e-gift cards, setting up fake resale listings or using stolen credit cards to buy e-gift cards and resell them before they are deactivated. Fraudsters often trick victims into revealing card details as if to “verify” the e-gift card but then steal the fund.
Types of e-Gift Cards Fraud
How do gift cards scams work? E-gift cards scams come in various forms that are often unrealized by people. To avoid fraud, we should learn the types of scams to prevent them from happening to us. Awareness and caution are the key to gift card fraud prevention.
1. Secondary Marketplace Scam
Usually, fraudsters exploit resale platforms to sell fake, stolen, or even drained e-gift cards. Scammers may promote the cards at discounted prices, luring buyers to purchase used or non-functional cards.
These fraudsters also use stolen credit cards to buy e-gift cards and then resell them. However, when the fraud is detected, retailers will deactivate the card, leaving the buyer with nothing. To avoid this scam, consumers should only purchase e-gift cards from official retailers or platforms that offer protection and refunds for fraudulent transactions.
2. Credit Card Fraud
Fraudsters usually use stolen credit card details to purchase digital gift cards and then quickly resell or use them before the fraud is detected. Once the original cardholder reports the unauthorized transaction, the buyer could end up having a worthless code because the retailer may deactivate them.
3. Hacked Code
Another type of egift card fraud is done by using hacking techniques, such as phishing attacks, or brute-force programs to generate valid gift card codes. These fraudsters steal or access retailer’s databases and even intercept emails containing e-gift cards. Once they obtain the code, they will use or resell the card with an empty balance.
Consumers can prevent this by using a strong email security, redeeming the card immediately, or purchasing them from trusted and reliable sources. Retailers can implement security measures like CAPTCHA or multi-factor authentication for code verification.
4. Account Takeover (ATO)
In this type of egift card fraud, fraudsters try to gain unauthorized access to a victim’s online account. They use phishing, credential stuffing using leaked passwords from other sites, or even malware. Once inside, they steal the e-gift cards or buy new ones and then transfer the balance to themselves.
To prevent this scam, users should implement two-factor authentications, use unique passwords, and regularly monitor the account activity for unauthorized transactions.
Also Read: Account Takeover Prevention: Reducing Financial Threats
5. Elder Abuse
In this type of egift card fraud, fraudsters often manipulate or pressure older adults into purchasing and sending e-gift cards. They often pose as family members or government officials, claiming urgent payment is needed to help loved ones in distress or to avoid legal trouble.
Unwittingly, the elder may share the e-gift card details which will enable the fraudster to drain the funds. This transaction is nearly impossible to trace or reverse so that the elder will end up with nothing. Therefore, the elderly should be given information about scams, ensure verification of any suspicious messages, and encourage skepticism toward urgent payment requests.
Impact of E-Gift Cards Fraud Merchants
Not only to the general public, e-gift cards fraud has significantly affected merchants. Repeated fraud incidents can damage reputation, reducing sales due to eroding customer trust. The most common impact is as follows:
1. Chargebacks and Penalties
Fraudsters often use stolen credit cards to buy e-gift cards. When the original cardholder disputes the transaction, it will result in chargebacks. This incident will cost money, a higher payment processing fee, penalties, and even account suspensions.
2. Brand Reputation
As mentioned above, the impact of e-gift cards fraud can damage brand reputation due to eroding customer trust. They may blame the retailer; and give negative reviews or complaints on social media. The bad press could discourage potential buyers as they lose trust in the brand.
3. Revenue Loss
Besides chargebacks, merchants could lose some revenue due to the refund money and losing the gift card value. There are also extra costs from fraud prevention systems, potential penalties from payment processors, and customer support for fraud-related issues.
4. Future Risks
Cybercriminals exploit advancements in AI to hack gift card codes or bypass security measures. The rise of the dark web also enables easier buying and selling of stolen items, including stolen e-gift cards.
How to Prevent E-Gift Cards Fraud
Prevention measures to avoid egift cards fraud require a joint effort between consumers, merchants, and technology. Consumer awareness and a cautious nature are crucial to protect themselves, including monitoring accounts. Learn about common scams, such as phishing and secondary marketplace fraud.
Merchants should implement AI-driven fraud detection systems and enable multi-factor authentication to add an extra layer of security. CAPTCHA verification is needed to prevent automated bots from testing stolen gift card codes.
Also Read: AI Authentication: Top Fraud Prevention Solutions in 2025
To assist you in the prevention measures mentioned above, you can reach out to the experts in real-time risk detection. A verification platform using seamless authentication will boost security to flag suspicious transactions and high-risk purchases. Learn more about fraud detection technology with Keypaz now!