How to Prevent Gift Card FraudStop Cleaning Up After Fraudsters & Start Stopping Them in Their Tracks

Guy Harris | July 17, 2025 | 4 min read

Prevent Gift Card Fraud: How The Right Tools Can Keep Scammers at Bay

Reacting to gift card fraud after the fact is a losing battle: both the scammer and the money are already gone.

The only way to win is to proactively stop fraudsters before they get a chance to strike. A robust defensive arsenal, built on a multi-layered strategy of smart technology and strategic policies, is your best and most cost-effective weapon.

In this last chapter, we’ll outline essential tools and best practices that you can use to protect your revenue and customers from bad actors.

How Merchants Can Avoid Gift Card Fraud

I’ll say this straight up: it’s not easy for merchants to avoid gift card fraud.

For example, manually reviewing transactions creates excessive friction for legitimate customers. But, a cavalier attitude towards the problem risks alienating buyers; especially those who have purchased gift cards from you and later became victims of theft.

Put another way, it’s difficult to thwart gift card fraud at the transaction level. Instead, keeping bad actors at bay requires action on a broader, policy-level approach. This may include:

Limiting bulk gift card purchases

Imposing limits on the number of gift card sold per transaction won’t stop the fraud, per se. It may help control it by imposing reasonable limitations on purchases, though.

Implementing daily spending limits

Fraudsters have to act quickly . They will typically try to use the entire balance of a stolen card in one shot. Daily limits may help prevent this.

Tracking gift card data

Merchants who track cards from purchase through redemption are more likely to spot suspicious behavior, such as several new card balances going to one account.

Monitoring marketplace site

Watch for your brand on gift card trading sites, in addition to social media markets and seller sites such as eBay. Too many cards offered by the same seller could indicate fraud.

Imposing card dollar value limits

It takes more effort to convert 25 cards to cash, each valued at $20, than one gift card valued at $500. There are lower margins per card. Limiting value amounts may make your cards less enticing to fraudsters.

Securing data

Save gift card activation to the end of transactions. Teach employees to double-check all cards prior to activation for any sign of tampering.

Monitoring card activation

Fraudsters know you’re extra busy during the holiday rush. This is exactly why you can’t afford to let security slide. Double down on data security to avoid IT glitches and data breaches.

A Real-World Look at Chargeback Management

Based on a survey of over 400 merchants, the report presents a comprehensive, cross-vertical look at the current state of chargebacks and chargeback management.

Access the FREE Report

Regulatory Liabilities & Compliance Considerations

Regulations and compliance standards can help you manage your risk. But, they impose strict responsibilities on you as well. Be sure you’re up on the current requirements for your specific business to issue gift cards:

Consumer Protection Laws

While standard debit and credit cards are protected under the Fair Credit Billing Act of 1974, gift cards are subject to a more limited set of guardrails. Still, you should be aware that the CARD Act of 2009 extends certain protections to gift card users. For example, the law prohibits merchants from charging inactivity fees or delinquency fees. A gift card also can’t expire sooner than five years from the date it was activated.

While this doesn’t directly affect merchants currently experiencing gift card fraud, it does limit the fraud prevention tactics that businesses can use to prevent gift card fraud. For example, lengthy expiration periods, while beneficial for consumers, can also give fraudsters a wider window of time to act.

Anti-Money Laundering (AML) Requirements

In 2011, the Financial Crimes Enforcement Network (FinCEN) passed a final rule. Known colloquially as the Prepaid Access Rule, it requires “providers of prepaid access” cards, such as merchants and retailers, to develop and implement an anti-money laundering (AML) program.

The takeaway? While AML and anti-fraud provisions can help you preemptively thwart gift card fraud, it also imposes certain compliance costs on you from the outset.

Payment Card Industry (PCI) Compliance

Whether you accept debit cards, credit cards, or gift cards, the Payment Card Industry Data Security Standard (PCI DSS) applies all the same.

While some of these compliance obligations will fall on your payment gateway, you’ll still be responsible for staying in line with other requirements. For example, you’ll need to secure your network with a firewall, secure your systems and applications, and safeguard both physical and digital access to gift card data.

Data Privacy Regulations

You’ll inevitably need to gather some information from your buyers when selling gift cards. While that’s not inherently a problem, bear in mind that collecting personally identifying information (PII) from gift card holders will give rise to obligations under data privacy laws like the EU’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).

In a nutshell, you’ll need to obtain consent from buyers before collecting data from them and thoroughly disclose the information you’ll be collecting. You’ll also be prohibited from selling cardholder data to third parties, and must give gift card buyers the option to delete their data from your site.

Reporting Obligations

As part of the AML requirements described above, you’ll be required to report anomalous or high-value gift card transactions. Specifically, businesses are required to file Suspicious Activity Reports (SARs), keep up-to-date records, and maintain a database of transaction information. Additionally, merchants must take steps to verify the identity of buyers who purchase more than $10,000 in gift cards in a single day.