Thieves are tampering with gift cards hanging on retail store racks, copying the card numbers and PINs, then waiting for an unsuspecting buyer to load money onto the card so they can drain it within minutes. The Federal Trade Commission warned consumers in December 2024 that scammers remove protective stickers or scratch off the coating on the back of cards to capture the codes, then reseal the packaging so it looks untouched. A separate federal investigation in New Hampshire has linked this type of scheme to an organized ring responsible for millions of dollars in consumer losses, with stolen balances spent on high-end electronics.
How in-store gift card tampering drains your money
The fraud works because most gift cards sit on open display racks where anyone can handle them. Criminals peel back or remove the protective scratch-off material, record the card number and PIN, then replace the sticker or apply a new one. Once a shopper buys and activates the card at the register, the thief checks the balance online and spends it before the buyer even hands the card to a friend or family member. In a recent consumer alert, the FTC urges shoppers to look closely at the physical card and packaging, watching for any signs of scratching, peeling, or mismatched stickers before completing a purchase at the register.
The scale of the problem is not small. FTC Consumer Sentinel data showed tens of thousands of gift card scam reports with large dollar losses in 2021, and the volume of complaints grew steadily from 2018 through that year, according to an FTC analysis. Those figures capture all gift card fraud vectors, not just in-store tampering, which means the full picture of shelf-level theft is likely buried inside a larger and still-growing total. Still, the data underscores how attractive gift cards have become to scammers, who value the cards’ anonymity, speed of use, and the difficulty consumers face when trying to recover stolen balances.
Once the card is compromised, the rest of the scam can move quickly. Some criminals use automated scripts or bots to repeatedly query card issuers’ balance-check websites, flagging when a targeted card suddenly shows a positive balance. Others simply check manually, cycling through lists of card numbers they have harvested from store racks. As soon as money appears, they rush to spend it on digital purchases, online orders, or in-store transactions using cloned physical cards. Because many issuers treat gift card transactions as final and do not provide the same protections as credit cards, victims often discover the loss only when a recipient tries to use the empty card.
Federal prosecutors and new state laws target the scheme
The U.S. Attorney’s Office for the District of New Hampshire issued a public service announcement identifying victims of a gift card fraud ring that caused millions in consumer losses. Homeland Security Investigations, IRS Criminal Investigation, the U.S. Postal Inspection Service, and local police are all participating in the probe. According to federal investigators, stolen card balances were used to buy high-end electronics, a common cash-out method because those goods hold resale value on secondary markets and can be moved quickly.
Investigators say the New Hampshire case highlights how what appears to be petty retail theft can actually reflect a coordinated, multi-state operation. Suspects may travel from store to store, quietly tampering with racks of cards in a single visit, then returning weeks later to see which cards have been activated. The federal inquiry is ongoing, and authorities are still working to identify additional victims whose cards were drained as part of the scheme.
State legislatures are also responding. Maryland’s SB 760 requires retailers to use secure packaging that visibly shows tampering and conceals the activation and redemption codes on gift cards. Open-loop cards, the kind that work like debit cards at multiple stores, must comply by June 1, 2025, with closed-loop cards following by October 1, 2025, according to the state’s compliance guide. The law is the most specific state-level mandate so far, but no retailer audit results or early violation data have been published, leaving open questions about how consistently stores will implement the new standards.
Consumer advocates say Maryland’s approach could become a template for other states, especially if it proves effective at deterring shelf tampering. By forcing issuers and retailers to redesign packaging so that any interference is obvious at a glance, lawmakers hope to shift some of the burden away from individual shoppers. However, until more jurisdictions adopt similar requirements, the level of protection will vary widely depending on where a customer happens to buy a card.
What shoppers can do right now
For now, most of the responsibility still falls on consumers at the point of sale. The FTC’s December warning on checking gift cards before buying emphasizes a few simple habits: choose cards kept behind the counter or in locked cases when possible, avoid any card with scratched coating, loose stickers, or exposed numbers, and keep the purchase receipt in case you need to document a complaint.
Experts also recommend activating and, if possible, spending gift cards quickly rather than letting them sit unused for months. Registering a card on the issuer’s website, when that option exists, can make it easier to track balances and report suspicious activity. If you discover a drained card, report it immediately to the card issuer and then to the FTC, and consider filing a complaint with your state attorney general. While refunds are not guaranteed, prompt reporting can help authorities spot patterns, link cases across states, and build the kind of investigations that led to the New Hampshire probe.
