If you're thinking of buying gift cards to give away as Hanukkah or Christmas presents, there are many reasons why you and the recipient would be better off just giving cash, including this: even legitimate retailers selling genuine gift cards can all-too-easily sell you a worthless, stolen card without even realizing it.
Here's how: you've surely seen, in various stores, those racks offering gift cards to various businesses. Some of those cards are for set amounts – a $25 gift card, a $50 gift card – while others are sold “empty,” and you choose how much money to put on the card.
Regardless of which type you choose, the actual card itself – that small plastic wallet-size rectangle – is worthless until you actually take it to the cashier and pay to put however-much money on it. In other words: a dishonest person could easily shoplift a $25 card by putting it into their pocket and walking out of the store without paying a cashier $25 first, but in that case the shoplifter would only have the piece of plastic; he couldn't use it to buy $25 worth of stuff unless someone actually paid $25 to activate that particular card.
A sensible security precaution. But here's the problem: for some types of cards, thieves can steal their activation codes and other data, monitor the cards and drain their balances the second they're bought.
So, for example, you buy a particular card in a store, and pay the cashier $25 to activate it. But you don't realize that a thief is monitoring that specific card, and notices when it is activated: you pay $25 in the store today, and the thief's probably drained the balance by the time you get home. And this theft most likely won't be discovered until the recipient tries to spend the card.
Still going strong
This particular form of gift card scam is not new – as early as 2004, Seattle-area Walmart customers who bought gift cards in Walmart stores fell victim to the scam: one woman paid $150 to activate a card at a store in Olympia, and then three hours later, that card was completely drained at a store in California (far more than three hours' drive away).
Ten years later, that scam's still going strong enough that the Better Business Bureau still issues warnings reminding people not to be taken in by that particular form of gift card fraud, and recommends that anyone buying a gift card in a store should
Look for tampering – The safest gift cards to buy are those that are in a thick plastic casing. If the gift card you want to buy is not in this packaging, check the back of the card to make sure the PIN hasn’t been scratched off. Thieves will often enter the store and write down the credit card number and PIN to make purchases online.
But Scambusters goes even further than the BBB, recommending that:
Even though this type of gift card scam is now only occurring on a very small scale, we still advise that you don’t buy gift cards displayed on public racks since this scam is so simple for scammers to execute. … Don’t buy gift cards off of publicly displayed racks in retail stores. In addition, don’t assume that because gift cards are inaccessible to the public, they are safe. After all, store employees can participate in gift card scams too.
Always carefully examine both the front and back of a gift card before you buy it. If you can see a PIN number, put the card back and get a different one. If a gift card looks like it could have been tampered with, don’t buy that gift card.
Indeed, you could go further still and say that if you want to give someone a form of spendable currency as a present, cash works better than gift cards in many ways, because it can be spent anywhere rather than limited to a specific store, and there's no need to worry the company behind the gift card will go out of business, either.