Gift Card Draining and the 2024 Gift Card Scams Prevention Act

The State of Maryland recently caught the attention of retailers and marketers nationwide with the passing of the Gift Card Scams Prevention Act of 2024. In short, this new Maryland law requires that gift cards sold in stores incorporate gift card security features to prevent gift card scam artists from obtaining a gift card number before the card has been sold. Meanwhile, gift cards sold online must be registered with the Maryland Attorney General’s Division of Consumer Protection.

Maryland’s new law is meant to thwart a phenomenon known as gift card draining and the resulting implications for companies engaged in custom gift card printing are significant. This blog will describe the most common types of gift card scams, including gift card draining, and explore the various gift card security features that are available to help prevent gift card scams.

What is gift card draining?

The term “gift card draining” applies to a gift card scam that seeks to access a gift card balance online and steal it before the rightful owner can use the card as intended.

How do gift cards get drained?

A variety of gift card scams are being used by criminals but the following type of “physical tampering” offers a straightforward example:

• The fraudster goes to the point of sale and pulls an inactivated gift card from the rack.
• Using an X-ACTO® knife or something similar, they slice the card carrier open to reveal the number imprinted on the card.
• The fraudster records the card number, re-seals the card carrier to hide the tampering, and puts it back on the rack.
• A consumer eventually buys the gift card and it is activated by the cashier, “loading” it with a certain dollar value.
• The fraudster logs in periodically to check the balance on the card, waiting for evidence of activation. Once they see it has been activated, they quickly make purchases using that card number.
• The consumer who purchased or received the gift card is later told that their gift card account has been depleted. They have unwittingly become the latest victim of a gift card scam known as gift card draining.

How common is gift card draining?

According to the Federal Trade Commission, gift card scams including gift card draining resulted in $217 million in losses during 2023. The problem isn’t getting any better. In the first half of 2024, the agency received nearly 20,000 gift card scam complaints representing approximately $100 million in losses.

How do you secure a gift card?

Even before the passing of the Gift Card Scams Prevention Act of 2024, retailers and other businesses that rely on gift cards were eager to learn how to avoid card draining. Whether viewed from the vantage point of the business or the consumer, the goal is simple:

How do I protect my gift card from theft?

The following explains the important role that customized gift card packaging and other security measures can play in minimizing the risk of gift card scams and gift card draining in particular.

Tamper-evident packaging

The gift card carrier is manufactured in such a way that the carrier is defaced during the opening process. Some examples include custom gift card packaging that fractures when opened, non-wettable adhesives that prevent a gift card carrier from being re-sealed, and the placement of PINs and activation numbers deep within the carrier package itself.

Tamper-evident labeling

Scratch-off label material can be applied over the top of gift card numbers and activation numbers, requiring the gift card scam artist to disturb the scratch-off in order to view the number.

Data management

A card number that has experienced balance checks prior to being activated at the point of sale can logically be assumed to have been compromised by fraud. Thus, the retailer can simply block that card number from activation, preventing a cashier from selling it.

Disclosure language

Disclosure language at the point of sale, warning consumers about the potential for gift card scams, is another preventative measure being explored. A law passed by the State of New York requires that retailers selling gift cards post a notice that cautions consumers about gift card scams and provides tips for what to do if they have been victimized.

Taylor: Preventing Gift Card Draining Before it Occurs

Taylor is one of the leading gift card manufacturers in the world. With decades of experience in customized gift cards and custom gift card printing, Taylor creates paper gift cards as a more environmentally conscious alternative to plastic gift card printing.

This expertise also extends to the creation of tamper-evident gift card packaging that is specifically engineered to deter gift card scams — and help prevent gift card draining before it happens. Want to learn how to avoid card draining? Contact your Taylor representative to learn about Taylor’s tamper-evident card carrier technologies.