Gift Card Fraud

Gift Card Fraud encompasses a range of illicit activities that exploit gift cards for financial gain. Because gift cards are easy to buy, difficult to trace, and quickly converted into goods, they are a popular target for fraudsters and a preferred instrument in social engineering scams.

Common types of gift card fraud

• Stolen payment fraud: A fraudster uses stolen credit card details to purchase gift cards. They redeem or resell the cards before the chargeback hits the merchant.
• Code guessing/brute force: Attackers attempt to guess valid codes by submitting thousands of combinations. Weak code formats make this easier.
• Social engineering scams: Victims are tricked (often by phone or email) into buying gift cards and sharing the codes with the scammer, who quickly redeems them.
• Reseller fraud: Fraudsters buy cards with stolen funds and sell them at a discount on secondary markets before detection.
• Employee theft: Staff with access to gift card systems activate cards for personal use without a corresponding payment.

Prevention strategies

• Velocity checks: Flag or block accounts that purchase multiple gift cards in a short time frame.
• CAPTCHA and bot protection: Add CAPTCHA to the gift card purchase and redemption forms.
• Rate limiting on code entry: Restrict the number of redemption attempts per session or IP address.
• Strong codes: Use 16+ character cryptographically random codes to make guessing infeasible.
• Delayed activation: Hold gift card activation for a short period after purchase to allow fraud detection systems to flag suspicious orders.
• Monitoring: Track gift card purchase and redemption patterns. Alert on anomalies like bulk purchases, rapid redemptions, or redemptions from unusual geolocations.