We’re heading into gift card season, and that comes with its own set of risks, which go beyond your uncle getting you a $5 Starbucks card when you got him a cashmere sweater.

“Gift card draining is a type of fraud in which thieves steal the value from a gift card, often before the legitimate buyer or recipient even gets a chance to use it,” according to Monterra Credit Union.

• Sometimes fraudsters remove inactivated cards from store shelves, record or photograph the card numbers and PINs, then place them back on the rack. 
• Once someone buys and activates the card at checkout, the scammers monitor the card online and, as soon as it’s loaded with value, quickly spend or transfer the funds, leaving the real buyer with a zero-balance card. 
• Because the tampering can be subtle (sometimes just a barcode sticker is replaced or the package is resealed), unsuspecting buyers frequently have no idea the card was compromised. 

“We’re talking hundreds of millions of dollars, potentially billions of dollars, [and] that’s a substantial risk to our economy and to people’s confidence in their retail environment,” Adam Parks, a Homeland Security assistant special agent in charge, told ProPublica.

A multi-agency investigation recently took down a gift card tampering ring that targeted Walmart, Target, and Walgreens locations across multiple states.

Suspects arrested in Walmart, Target, and Walgreens case

“The Texas Financial Crimes Intelligence Center (TX FCIC) led a multi-agency investigation that dismantled an organized gift card tampering operation spanning Texas and Arkansas, resulting in the arrest of four suspects during two separate operations in Sugar Land and Tyler. Investigators recovered hundreds of tampered gift cards representing more than $100,000 in potential losses from a single day of activity,” according to a press release from the Texas Department of Licensing & Regulation (TDLR).

The investigation began in June 2026 after the Walgreens Major Crimes Investigative Team alerted special agents with TX FCIC Gulf Coast Field Operations to tampered gift cards found on store shelves in Willis, added TDLR.

The state agency shared the mutliple steps the case followed:

• Walgreens also provided photos of the suspect and the white Lexus NX he was driving.
• Working with retail partners, TX FCIC special agents identified additional suspects and a second vehicle, a white Mercedes C300, connected to the scheme.
• On June 26, 2026, TX FCIC and the Sugar Land Police Department arrested two suspects after observing them place tampered gift cards at Dollar Tree and Family Dollar stores in Sugar Land.
• In July 2026, investigators learned the suspect driving the white Lexus NX had expanded the scheme to retail locations in Arkansas.
• TX FCIC worked with retail partners, including Walgreens, Target, Walmart, CVS, Albertsons, and Dollar Tree, to confirm the activity and remove tampered cards from store shelves.
• On August 24, 2026, TX FCIC special agents and the Tyler Police Department arrested a third suspect after observing him place tampered gift cards at Walmart and Walgreens stores in Tyler.
• Investigators also found bundles of tampered cards intended for other stores in his vehicle. Investigators later executed a search warrant at a nearby hotel, where they arrested a fourth suspect and found hundreds of additional tampered gift cards and tampering tools.

“Investigators say the suspects used a coordinated scheme to avoid detection. Gift cards were stolen from store shelves and compromised in a hotel room or residence, where the security scratch-off coating was peeled back to record each card’s activation code and serial number. The cards were then resealed and returned to store shelves. Once a customer purchased and activated a tampered card, the suspects, who already had the activation code, immediately drained the balance electronically, leaving the customer with nothing,” the TDLR shared.

How big a problem is gift card draining?

The scale of the problem is difficult to measure, but available consumer data suggest that gift-card fraud affects a significant number of Americans.

“Gift cards remain a holiday staple, with 7 in 10 consumers (72%) planning to purchase them this year. Unfortunately, criminals have become experts at draining these cards. One-third (33%) of adults have given or received a gift card with no balance,” according to AARP.

It’s also a crime that may sometimes go unreported, as the gift receiver may not know what happened. I, for example, have received both Target and Starbucks cards for relatively low values that were empty.

Was it gift card draining or a mistake in activating the card? I didn’t know and couldn’t really ask the gift giver.

Broadly, gift card fraud is a significant problem.

“The Federal Trade Commission received more than 41,000 fraud reports in 2024 representing $212 million in losses from scams involving gift cards and prepaid cards. Using data compiled through the third quarter of last year, there were over 30,000 reports and $199 million in losses, with expectations that losses in 2025 will be similar,” the National Conference of State Legislators shared.

How to protect yourself and your gifts

The Federal Trade Commission (FTC) shared tips on how to protect yourself from gift card draining scams.

If you’re buying gift cards this holiday season:

• Check for signs of tampering. If it looks like someone scratched off the back of a gift card or removed any stickers, tell a cashier or manager. Scammers might tamper with gift cards in batches, so if you see something suspicious on one card, consider looking at a different store.
• Pay by credit card if you can. You get the most protections when you pay with a credit card. If you run into problems and file a chargeback, your credit card will investigate and you might get your money back.
• Keep copies of the gift card and store receipt. If the gift card doesn’t work or doesn’t have any money on it, the number on the card and store receipt will help you report to the gift card company. The sooner you report, the better. You can also report fraud to the FTC.

Report gift card scams at ReportFraud.ftc.gov.

Forbes’ Steve Weisman shared one more useful safety tip.

“When buying a gift card, only purchase cards from behind the customer service desk, and if the card is preloaded, always ask for the card to be scanned to show that it is still fully valued. This avoids all of the problems of tampering with the card before it is sold,” he wrote.

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