Gift Card Fraud Surges as Scammers Get More Sophisticated

Gift Card Fraud Surges as Scammers Get More Sophisticated

Lawmakers are establishing penalties for scammers and enlisting merchants to warn consumers.

A retailer's gift card display includes a sign warning consumers about fraud. (Jeff Greenberg/Getty Images)

Gift card scams and fraud are on the rise.

The Federal Trade Commission received more than 41,000 fraud reports in 2024 representing $212 million in losses from scams involving gift cards and prepaid cards. Using data compiled through the third quarter of last year, there were over 30,000 reports and $199 million in losses, with expectations that losses in 2025 will be similar. Facilitated by technological advancements, these scams are becoming easier, more common and more catastrophic for consumers.

Gift card scams and fraud generally fall into one of two categories: online scams that use false pretenses to trick a consumer into purchasing a gift card and handing over the card number/PIN to the scammer; and frauds such as card draining, where the scammer steals card information either in-store or online before it is purchased, waits for a consumer to load up the card, then immediately drains the funds.

Lawmakers from 22 states introduced at least 30 bills targeting gift card scams and fraud in 2025. This is a significant increase from the previous year, when eight states introduced 12 bills on the topic. Two legislative trends have emerged: the establishment of criminal offenses and/or penalties for gift card scams and fraud; and the creation of new requirements for merchants, the most common of which is posting a fraud notice to consumers.

Criminal Offenses and Penalties

At least 25 bills were introduced last year to create criminal offenses and/or penalties for gift card fraud. Six states-Arkansas, Florida, Iowa, Kentucky, New Hampshire and Texas-enacted bills in this category. Criminal offenses tend to include fraud and theft, although some also specify tampering or forgery. Penalties range from misdemeanors to felonies.

• Iowa (SB 266) created criminal offenses and penalties for theft, forgery and fraud involving a gift card; crimes include acquiring redemption information without consent of the card owner, tampering with a gift card and devising a scheme to obtain a gift card or its redemption information under false pretenses.
• Arkansas (SB 302) also created the offense of gift card fraud and set penalties ranging from a Class A misdemeanor, where the gift card value is less than $1,000, to a Class B felony, where the gift card value is $25,000 or more.
• Texas (SB 1809) created the offense of gift card fraud but set penalties based on the number of unactivated or counterfeit gift cards or the gift card information that an individual has in their possession, ranging from a state jail felony for fewer than five cards to a felony in the first degree for over 50 cards.

Merchant Requirements

Over the last five years, six states-Delaware, Maryland, Nebraska, New Jersey, New York and Rhode Island-have enacted legislation in this category. The most common requirement that lawmakers have set for merchants is to post visible notices warning consumers about potential gift card fraud.

Three states-Maryland, Nebraska and New York-explicitly require state government to make available a model notice that merchants can use to fulfill this requirement. These model notices typically include a warning about the risks of gift card scams, the resources available to consumers, and/or next steps that individuals should take if they suspect they have been scammed.

Two states-Maryland and New Jersey-have passed laws creating additional requirements related to packaging, record-keeping and employee training.

• Maryland (SB 760; 2024) required merchants to conspicuously display a fraud notice, and required the state to make a model notice available for use. Merchants must train employees on how to identify and respond to gift card fraud. Specified gift cards for sale must be enclosed in secure packaging, conceal any redemption codes and include a warning not to sell or purchase if the packaging has been broken or indicates tampering. Finally, third-party sellers of gift cards must maintain transaction records for up to three years, including date of the transaction, gift card number and specified amount, and the consumer's signature.
• New Jersey (AB 802; 2020) was the first state to pass legislation requiring merchants to train their employees on how to respond to gift card fraud. In 2025, the state enacted additional legislation (SB 3587) that included a fraud notice, packaging and record-keeping requirements.
• New York (AB 1009; 2023) was the first state to pass legislation requiring state government to make a model fraud notice available online for sellers to print and display.

In 2025, there were at least eight bills introduced in this category, but Nebraska (LB 609) was the only state to enact legislation. The law, known as the Controllable Electronic Record Fraud Prevention Act, requires merchants to post a notice of potential fraud for purchasers of gift certificates and gift cards.

Widespread Problem

A 2025 Pew Research Center survey revealed that over 90% of U.S. adults say that online scams and attacks are a problem. While older adults are particularly vulnerable, anyone can be a target. In fact, Pew found that about three-quarters of adults between the ages of 18 and 64 reported having experienced at least one online attack. The FTC reported that, over the last four years, there has been a huge jump in losses reported by people over 60 due to impersonation scams, with scammers often pretending to be from trusted businesses or government agencies. The risk of scams and fraud also increases around the holidays when more people are purchasing gift cards.

In recent years, state legislatures have passed other laws regarding gift cards and consumer protection, such as prohibiting expiration dates or fees or authorizing cash redemption. For example, at least 15 states and Puerto Rico have statutory provisions allowing consumers to redeem the value of a gift card in cash if the value is under a certain amount-most commonly $5 or less, but California set the threshold at $15.

Aided by technology, scammers are becoming more sophisticated. The Office of the Comptroller of the Currency recommends taking time to look for signs of tampering on a physical card, being wary of unsolicited offers of free or discounted gift cards, and knowing that no legitimate government agency or business will ask for payment in the form of gift cards.

Olivia Parker is an intern in NCSL's Financial Services, Technology and Communication Program.