Millions of Americans will buy gift cards over the next few weeks — thinking it’s the safest, simplest holiday gift. But this season, one of the most widespread consumer scams is happening before you ever pull out your wallet.
Investigators say organized criminal rings have already drained more than $1 billion from gift cards purchased at major retailers across the nation.
Gift-card fraud is rapidly emerging as a new element of organized retail crime (ORC), which the FBI defines as “the large-scale theft of retail merchandise with the intent to resell the stolen items for financial gain…often involving a criminal enterprise utilizing groups of individuals to steal large quantities of merchandise from multiple stores across several jurisdictions.”
Many victims don’t discover the loss until they go to Hot Topic or Sephora to use the card Grandma gave them and find the balance is already $0.
Gift cards are an easy target for criminals because they sit out in the open.
How gift card scams work
The gift-card theft is known as “card draining,” and consumers and retailers are both victims.
“We’re talking hundreds of millions of dollars, potentially billions of dollars, [and] that’s a substantial risk to our economy and to people’s confidence in their retail environment,” U.S. Department of Homeland Security Assistant Special Agent in Charge Adam Parks told ProPublica for a 2024 report.
Parks, who is based in Baton Rouge, Louisiana, said in 2023-2024, enforcement across the country arrested about 100 people for card draining, but he told ProPublica he estimates that another 1,000 people could be involved in card draining in the U.S., primarily as runners for the gangs.
Gift-card draining doesn’t rely on tricking consumers through email, texts, or fake calls. Instead, criminals target the cards on store racks, where they’re easiest to tamper with.
According to the Better Business Bureau (BBB):
- Thieves remove gift cards from displays and carefully open the packaging.
- They record the card number and PIN, then reseal the package so it looks untouched.
- Bots monitor the cards around the clock.
- When a shopper buys one and loads money onto it, the system instantly drains the funds — often within minutes.
Why this holiday season is especially risky
In recent cases, shoppers bought sealed cards from big-name retailers, only to learn the entire balance vanished less than 10 minutes after checkout.
The crime likely occurs much more frequently than anyone realizes.
“There is confusion, embarrassment that they did something wrong. Or I don’t want to confront my grandmother…If someone steals 100 out of my pocket, that person will be standing there in handcuffs. But with a gift card, it’s not the same,” Parks said in a Homeland Security Investigations Group webinar hosted by the National Cybersecurity Alliance.
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Several converging trends have created a perfect environment for gift-card draining in 2025. Because gift cards are the most popular holiday gift in the U.S., and because the money can move quickly and anonymously, organized crime networks have figured out a way to take advantage.
Retailers such as Home Depot, Target, and Barnes & Noble often have racks of cards right out in the open, and many are understaffed, since retail has faced an unwelcome share of job losses.
So far in 2025, 88,664 jobs have been cut across retail, a 145% increase from the 36,136 announced through October last year, according to the October jobs report from Challenger, Gray, & Christmas.
Retail staff cuts mean gift card racks may not be monitored closely, making them an easy target.
Law enforcement officials and consumer advocates like BBB say the groups behind the scams operate across multiple states and often convert the stolen balances into cryptocurrency or high-value merchandise.
Retailers are scrambling to tighten security around gift cards
Several major chains have begun implementing new protections as the scam spreads:
- Locking or removing racks during overnight hours.
- Introducing tamper-evident boxes instead of blister packaging.
- Using batch-level barcode verification.
- Adding software that flags unusual activation behavior within seconds.
“Retailers have done a good job protecting gift cards,” Better Business Bureau Spokesperson Melanie McGovern told TheStreet. Still, “BBB recommends inspecting the card thoroughly before purchasing in-store, or buy online, but make sure you are purchasing from the retailer directly,” she says.
How to protect yourself from gift card scams
Experts say these steps significantly reduce your risk of buying a compromised card:
- Buy gift cards online directly from the brand or retailer.
- Avoid cards packaged in flimsy plastic; choose those sealed in boxed or card-backed packaging.
- Inspect the packaging for bends, glue residue, or new-looking stickers.
- At checkout, ask the cashier to scan both barcodes (on the card and the package).
- Check the balance immediately after activation.
- Keep your receipt and a photo of the card’s front and back.
- Register the card if the brand offers it.
The FTC urges consumers to file a complaint and contact the card issuer immediately if they spot fraud. Fast reporting increases the likelihood of reimbursement.
“The data we’re releasing today shows that scammers’ tactics are constantly evolving,” FTC Bureau of Consumer Protection Director Christopher Mufarrige said in an announcement. “The FTC is monitoring those trends closely and working hard to protect the American people from fraud.
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