Why gift card fraud victims almost never get their money back

The AARP runs ads claiming that any request to pay by gift card is always a scam. Patrick McKenzie, writing at Bits About Money, points out this is technically false — gift cards are a legitimate payment method used by billions of dollars worth of businesses serving unbanked customers. But he understands why they say it.

If someone tricks you into reading your debit card number over the phone, your bank has a legal obligation to make you whole. There's a button the customer service rep clicks, your money comes back, and an "investigation" gets launched. But if the same scammer convinces you to buy $500 in Target gift cards and read them the numbers? No button. No deadline. No investigation. A low-paid call center worker will suggest you file a police report — not because it'll help, but because giving you something to do gets you off the phone faster.

One big reason you'll never get your money back is that Target doesn't actually issue Target gift cards. They sell and accept them, but the actual issuing happens through program managers you've never heard of, like Blackhawk Network or InComm Payments. When fraud happens, Target's fraud department genuinely cannot access the gift card database.

This regulatory gap exists on purpose. FinCEN explicitly carved out gift cards under $2,000 to "preserve innovation" and avoid burdening retailers with know-your-customer requirements. The fraud supply chain figured out which retailers haven't invested in tracking suspicious purchases, and steers victims toward those cards. The FBI logged $16.6 billion in reported losses across payment methods in 2024 — just from people who bothered reporting.

Previously:
• Apple locked a 30-year customer out of everything over a gift card
• Judge: Google can profit from gift card scams without refunding victims