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What is gift card draining? How to avoid being a victim of this simple but popular scam

Here's what to know this holiday season to reduce your chances of being scammed.
/ Source: TODAY

So, you’re planning on giving some gift cards this holiday season? Well, be careful, because what you end up buying may not be what you think.

Gift card draining is a scam that has wreaked havoc among consumers. Here's what to know.

What is gift card draining?

Here’s how it works: Someone steals a gift card and then copies the card number and security code before resealing it, making it difficult to notice it’s been compromised. When another person later purchases the card and puts money on it, the scammer then takes the money, or “drains” the card of its funds.

Weekend TODAY anchor and senior legal correspondent Laura Jarrett is a recent victim of the scheme. She bought $2,000 worth of Vanilla Visa gift cards at a CVS in New York City only to discover that three of the cards had scuff marks in the spot where the security code is meant to be and that the money was drained.

“All of the seals look totally fine,” Laura said in a TODAY story that aired Dec. 20. “In fact, it says on here if tamper evident, don’t purchase, so I checked it before I checked out. Everything looked good from the outside.”

Gift card display.
Take caution when buying gift cards.Jeff Greenberg / Getty Images

One card that Laura had purchased looked completely fine, but the balance was zero when the money was taken two weeks after she had purchased it.

Laura is hardly alone. A 2022 AARP survey found that nearly one in four people have given or received gift cards that had no funds on them.

Gift card and reload card fraud cost $228 million last year, according to the Federal Trade Commission.

What is being done about this scam?

The Retail Gift Card Association and Vanilla Gift tell NBC News that thieves have become more adept and innovative when it comes to finding ways to drain cards. They also advise people to call police to report any fraud and call the number on the back of their cards if they are victims of draining.

CVS is also looking into the matter and cautions customers about the potential for fraud, while telling employees to monitor gift card racks to see if any cards have been abused.

How to avoid being a gift card draining victim

There are several steps you can take to reduce the chances you will become a draining casualty.

  • Some police recommend not buying a physical gift card. It’s virtually impossible to know which cards have been tampered with, and a virtual card eliminates that risk.
  • If you do purchase a physical card, buy one near the register or behind the counter in a store.
  • Gift card recipients should also check the balance and use the cards quickly to lower any risk.
  • When buying a gift card, use a credit card to make your purchase. That will boost the odds of getting a refund, if the need arises.