A gift card is an easy and popular way to give a gift to your loved ones to spend at their favourite stores, but they have also become a target for scammers. Every year, millions of pounds are lost to scams, hidden fees, short expiry dates, and cards rendered worthless when retailers go bust.
I explain how gift card scams work, what the law says and practical steps you can take to get your money back if you are scammed.
How gift card scams work
Gift cards are big business. Klarna recently valued the UK market at £7 billion and predicted it will reach £9 billion in 2025. Retailers love them because millions of pounds go unspent every year when cards expire or customers simply forget to use them. Scammers have also seen an opportunity to tap into gift cards with various scams.
The main scams to watch for are:
Impersonation and Payment Scams
Fraudsters posing as HMRC, banks, courier firms or “competition organisers” contact victims and insist they buy gift cards to pay a fine or claim a prize.
Legitimate organisations never ask for gift cards as payment. If you get a demand for a payment by gift card, treat it as a scam.
Hang up on suspicious calls.
Forward suspicious SMS messages to 7726 (your phone provider’s spam service).
Forward emails to report@phishing.gov.uk and report it to Action Fraud immediately.
Tampered Gift Cards
Some fraud stems from internal theft, where staff note down codes before the cards are sold.
In other cases, scammers target open displays or self-checkouts, scratch off the security strip, record the code and PIN and reseal it.
Once you buy and load the card, they use automated bots to detect when it’s activated and drain it instantly before you even get a chance to spend it.
Many cards can be used online or by phone, so the physical card isn’t always required for theft.
Online Bots and System Exploits
Some criminals don’t even need to step into a shop. They use bots to test thousands of card numbers on retailers’ balance-check pages until they find a live one.
When they find an active card, the bot spends it automatically. It’s sophisticated, fast and almost impossible for shoppers to spot until they try to use the card and find it empty.
Expiry dates and inactivity fees
There’s no UK law setting a universal expiry period for gift cards. Each retailer sets its own terms and conditions, but they must be fair and clear.
Some cards expire after only 6 or 12 months; others after 2 years. Some retailers such as IKEA and Selfridges have no expiry at all.
Hidden charges including inactivity of maintenance fees can quietly reduce the value.
- One4all charges 90p a month after 18 months of inactivity.
- Other cards have “maintenance” or “dormancy” fees.
Always check expiry dates and any fees before you buy a gift card. This information is usually buried in the small print or on the issuer’s website.
When retailers go bust
When a retailer goes bust, gift cards become virtually worthless. Card holders are treated as unsecured creditors and are rarely refunded.
If you hear a company is struggling, spend the card immediately.
Lost value during lockdowns
During the pandemic, many consumers were unable to use gift cards because shops were closed. Which? estimated around £100 million was lost due to expired vouchers.
Some retailers, such as Odeon, extended expiry dates as a goodwill gesture but there is no legal obligation to do so.
If your card expired because premises were closed, you can request an extension and refer to the Consumer Rights Act 2015. You can argue the card could not be used through no fault of your own.
Know your rights
Gift cards are considered a product and are captured by the Consumer Rights Act 2015.
Under the Consumer Rights Act 2015, goods and services must be:
- Fit for purpose
- As described
- Satisfactory quality
- Last a reasonable length of time
If a gift card has been drained by scammers, or fails to work, that requirement hasn’t been met so the retailer may be in breach of contract.
The gift card sold is clearly not ‘fit for purpose’, ‘as described’ and ‘satisfactory quality.’
Chargeback
If the gift card was bought with a debit or credit card, contact your bank or credit card provider and make a chargeback to reverse and dispute the transaction.
Chargeback is a voluntary scheme banks subscribe to, which allows your bank to claw back money from the retailer’s bank on disputes. You have a 120-day time limit from the date of transaction for debit and credit cards, with no value restrictions.
You need to push hard and stress ‘breach of contract’ on chargebacks, as they are often rejected on the first attempt. Chargebacks are not guaranteed, and banks may deny claims if they believe the cardholder could have prevented the fraud. Pre-empt this by demanding a copy of the gift card transaction history to prove your case.
The transaction will be temporarily reversed and repaid into your account to give the retailer an opportunity to present their case and defend it. There is usually a 45-day time limit. If your case succeeds, you keep the refund. If it fails, the payment is reversed and repaid to the retailer.
Chargebacks are costly and problematic for retailers to deal with, so even the threat of it will often elicit the right outcome.
Section 75 of the Consumer Credit Act 1974
If the value was more than £100 and paid by credit card, you can make a Section 75 claim under the Consumer Credit Act 1974 after 120 days as the card provider is jointly liable.
Escalate to the Financial Ombudsman
Follow the bank’s complaints procedure first.
If you remain unhappy with their response, you can ask for what is called a ‘deadlock letter’ (final response) from your bank or credit card provider so you can refer your case to the Financial Ombudsman Service for a free review.
The Financial Ombudsman will review your case and may issue a final, binding decision that the bank or credit card provider must comply with.
Banks don’t like complaints being referred to the Financial Ombudsman as it costs them money.
How to protect yourself
Inspect cards and packaging carefully – look for scratched-off security strips, broken seals or re-taped packaging.
Buy direct from the retailer’s official store or website. Avoid supermarket open racks or third-party sellers.
Pay by credit card for the strongest legal protection for purchases over £100.
Keep the receipt separate from the card.
Register e-gift cards online immediately if possible.
Spend quickly – treat them like cash.
Avoid cards with inactivity fees or short expiry dates.
Never share codes or photos of gift cards, even with people who claim to be friends or officials.
Never act on any demand for payment by gift card – it’s always a scam.
If You Have Already Been Scammed
Contact the retailer or card issuer immediately and ask them to freeze or cancel the card.
Get a transaction history – you are entitled to know where and when the funds were spent.
Report the fraud to Action Fraud.
Raise a chargeback or Section 75 claim with your bank or credit card provider.
Escalate to the Financial Ombudsman Service if your bank refuses to help after eight weeks.
My advice
Gift cards look convenient, but they are a minefield of expiry traps, hidden fees and scam risks.
Every year, millions of pounds are lost because people forget to use them, or worse – find they have been drained by scammers.
Don’t buy gift cards at all. Give cash instead.
If you do choose a gift card, go for one with no expiry or a long validity period and make sure the recipient knows to use it quickly.
Treat them as cash with an expiry date or simply avoid them altogether.
If you have already been scammed, don’t write it off. You may still have legal and financial routes to recover your money.