Gift cards remain one of the most popular holiday gifts, but scammers are finding new ways to steal your money before you even buy them.

Federal investigators say gift card fraud has grown into a billion-dollar international industry connected to Chinese criminal networks. Retailers and law enforcement, including Pennsylvania's Attorney General, are stepping up security.

Lisa LaBruno heads up the Gift Card Fraud Prevention Alliance, which is a partnership of 20 major retailers, U.S. Homeland Security and local law enforcement. She said criminals steal the unactivated cards, copy the numbers and PIN, and put them back on the rack for unsuspecting shoppers.

"Once the consumer purchases and loads money onto the gift card, the criminals use automated systems to drain the money from those cards," LaBruno said. "It's a significant problem, because look, one consumer getting their funds drained from a gift card is one too many from the perspective of retailers." 

Gift cards are now mentioned in at least 25% of fraud complaints, according to the Federal Trade Commission.

Retailers are introducing changes to protect consumers. Target redesigned its cards to now have a blank space where access codes used to be printed. Instead, the code is applied to the gift card by the cashier only at checkout to reduce the potential for fraud.

Other retailers are adding tamper-proof packaging or displays that prevent cards from being put back once removed.

Still, experts warn shoppers should take steps to ensure they're not buying a compromised card:

•  Always inspect gift cards before buying, make sure the PIN isn't exposed
•  Buy only from trusted retailers
•  Save your receipt and packaging in case you need to report fraud

Also, beware of other scams involving gift cards:

• No government agency or legitimate business will ever require payment with a gift card
• Check balances only on the official website listed on the card

While scams tied to gift cards are the exception, not the rule, LaBruno says consumers should remain vigilant.

"Gift cards remain one of the most popular gifts to give during the holiday season," she said. "That said, there are scammers out there, but rest assured, consumers can feel very confident that retailers and law enforcement are taking this very seriously and are working hard to address it."

This year, at least 11 states have passed new laws cracking down on gift-card fraud, according to AARP. Lawmakers in Pennsylvania have announced similar plans. In 2024, Delaware passed a law that requires retailers selling third-party gift cards to display notices alerting consumers to potential scams involving such cards.

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