These gift cards keep disappearing. Why?

gift, card, money, credit, free, present, expired, unused
By | January 30th, 2017

Did you hear about the guy who ordered a gift card that didn’t work? When he tried to exchange it, the company told him to get lost.

True story. How do I know? Because it’s my story.

I’d given my mother a $100 Amazon gift card for Christmas and when she tried to buy a pair of shoes online, the code was “not valid.” I asked Amazon to help and it deferred to a third party through which I’d purchased the card.

I’ll tell you how it all turned out in just a minute, but here’s the really surprising part: I’m not alone. As a consumer advocate, I received literally hundreds of “gift-card-not-working” cases in recent months. Companies issuing these cards — most of them closed-loop cards that can only be used at one company’s stores — appear genuinely perplexed at how to address the problem.

And that problem is: Gift cards are being abused by a small but apparently growing group of hackers and cheats, who bend or break the rules to maximize the value of the cards. If a business catches even a whiff of wrongdoing, they not only cancel the cards but they also often keep the money. And that’s fine, as long as they only do this to the bad guys. Lately, though, they’ve caught some innocents in their dragnet. I’m one of them.

How gift cards really work

Part of the problem is that gift cards look the same on the outside, but can be quite different under the hood. As I was trying to resolve my own invalid gift card case, a representative from the third party through which I’d received the card said that a company like Starbucks allows you to pull up your balance on a card and gives more detailed information on how the credit was redeemed; Amazon, on the other hand, will only reveal if the card is valid.

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There’s a reason gift cards are dumb. It’s in a company’s best interest to treat each card as if it’s cash — which is to say, to keep the cards as unsophisticated as possible. Certainly, the technology exists to track each purchase and to secure a gift card with a “smart” chip, but that wouldn’t really benefit the company in any way, since it would ultimately lead to a higher redemption rate by customers. The gift card “spillage” rate is somewhere around $1 billion a year. Ideally, companies want to keep your money and not give you anything for it, although they’ll never admit it.

Customers often assume that their gift cards are like credit cards, with built-in security and the ability to cancel and reissue. But after hours of phone conversations with representatives and some extra research, it became clear that the exact opposite is true. Gift cards are more like businesses that decide to legally print their own money and make up their own rules about it.

Steve Sultanoff, a psychologist based in Irvine, Calif., and a heavy gift card user, has learned these truths the hard way. Over the past almost 20 years, he’s bought and sold plastic, and he estimates that he currently has about $3,000 worth of cards.

“I have lost money many times,” he says. “There are several reasons why gift cards go bad but most of those involve buying from a third party. In all those years I have never had a problem with a card purchased directly from the company.”

How to beat the system

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Experts have a few tactics at the ready that prevent their cards from becoming worthless, apart from understanding how companies view gift cards and buying the cards directly from the company.

Closely inspect the packaging when you receive your card. “If the packaging looks tampered with or the PIN is revealed, turn the gift card in to the cashier and pick a different card,” advises Shelley Hunter, a card expert at GiftCards.com.

Also, check the activation receipt you receive to ensure the gift card number listed on the receipt matches the gift card you receive. If it doesn’t, alert a manager to the mismatch and ask for another card, says Hunter.

And if you choose to do business with a third party, as I did, make sure it has a customer service department and offers a money-back guarantee on purchases. Mine had a customer service department, but no money-back guarantee. And finally, whenever you buy a gift card, save the purchase and activation receipt until the gift card is redeemed.

But anyone who wants to beat the system by using gift card tricks to earn money ought to think twice. Any loophole that’s created will be closed, and when the door slams shut, a lot of regular customers will lose their money, too. Do you want those losses on your hands?

How I fixed it

My case was a little complicated. I’d purchased several $100 gift cards through Wells Fargo Rewards, to be used as presents. I do my banking through Wells Fargo, and it automatically enrolled me in its rewards program. Although I’m a loyalty program skeptic, I felt as if I really had no choice in the matter, but that’s beside the point.

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Of the nine cards I ordered, one of them didn’t work. It happened to be the one I sent to my mother as a Christmas present. I contacted Wells Fargo Rewards for help. Several days later, it said it had “resolved” the problem and that I needed to speak to Amazon.

Not true, an Amazon representative told me. The card didn’t work, she confirmed, but couldn’t reveal if it been redeemed and if so, when. She kicked me back to Wells Fargo. I asked Wells Fargo for help again and this time, a supervisor referred me to Amazon yet again.

And around and around we go.

Eventually, I started a paper trail with both companies and Wells Fargo issued a new card, which it sent directly to my mother. (And Mom — I’m sorry about the card!)

I have many dozens of cases where things didn’t go as well. The card balance vanished and it was gone forever.

Businesses have created gift cards to benefit themselves, not us. Looking at the problem of gift card abuse from their perspective, it’s understandable that they would tell a customer to get lost when a card doesn’t work. And technically, they didn’t tell me to “get lost” — at least not in those words — but that’s the message I received.

So remember: Gift cards are like cash, only worse. They only work with one company. They are primitive, at least compared with many other payment methods, and that lack of sophistication benefits the company entirely. Unintelligent payment mechanisms can be manipulated by clever, ethically-challenged consumers. When that happens, companies always assume the worst.

If you have to buy a gift card, get it directly from the source. Better yet, don’t use one at all.



  • sirwired

    Whew! When you said you had gone through a “3rd party”, I thought you were going to reveal that you had gone through one of those discounters, and I was going to wonder what on earth you were thinking!

    In any case, I’m surprised you are still with Wells Fargo, after the whole “fake account” fiasco! That would have been an excellent time to vote with your wallet and shift to the Credit Union of your choice.

    If you have an “in”, Navy FCU seems to have the largest national presence, on those rare occasions you need to visit an actual branch. Speaking for myself, most of my banking is with Pentagon FCU, but I also maintain an account with a local CU for branch services (notary, check-cashing, currency, etc.

  • Jeff W.

    SirWired has an excellent point and beat me to it. Not all third-parties are the same. There is a difference when buying a gift card from your neighborhood grocery store (check for tampering, of course) and buying them from a eBay or CardPool.

    Also surprised with you being a member of Wells Fargo. Regardless, you already do business with them and being a member of their rewards program does not cost you additional money. And you do not strike anyone as a person who would do MORE business with Wells Fargo to get additional points. Which means you are using their program smartly.

    And very smartly, as you were able to get nine gift cards — not sure if they all were for $100 — but still, nine gift cards, for nothing. All for doing what you normally do. And nothing more. And while one card did have an issue and took some time to resolve, the other eight did not.

  • LDVinVA

    My first thought, too – why is Chris still banking at Wells Fargo?

  • jim6555

    Chris, you disappoint me. How can a Consumer Advocate like you do business with Wells Fargo Bank? I’ve been a credit union member for almost 15 years and am very pleased. In addition to free checking and lower fees for services, my CU is a member of a cooperative that provides the opportunity to withdraw funds fee-free from over 50,000 ATM’s nationwide. I live in Florida and my daughter lives in California. When I visit her, there are 6 free ATM’s within two miles of her home. My CU allowed me to refinance my home at a rate that was lower than any local institution and provided me with a car loan at 1.5%. Why are you still using a bank instead of a credit union? Especially a bank with the reputation of having some of the worst anti-consumer policies in the United States.

  • Rebecca

    I’m going to get on a minor soapbox here, and for that I apologize. I understand not everyone sees this issue the way I do, although I suspect a lot more agree than are willing to admit it. To each their own.

    How did we become a society that finds it necessary to buy $100 gift cards for other adults? Christmas presents for kids are fun, I get it and I buy my kids presents. But do adults really need gifts for Christmas and birthdays? I’d say one of my ultimate pet peeves is adults that make a big show of their birthday; like they’ve accomplished anything other than being so greedy and attention seeking that they want a cake, a “special day”, presents. I simply don’t get it. The only thing we do for adult birthdays is that person gets to pick dinner and I make dessert (which isn’t a stretch because I love to bake and I do that all the time anyways).

    I’m not saying gifts are bad. They’re not. One of the things I enjoy doing is sending cards/letters for no reason. To kids and adults – kids love their own mail and adults only get bills. My husband and I buy each other gifts, but not for holidays. We do it when we see something we know the other would like. Same goes for other family members/close friends. If I see something I know they’d love, and I can easily afford it, I buy it. That’s what a gift is supposed to be. Something you know another person would love. Not something off a preprinted gift grab list or a monetary equivalent put on a piece of plastic.

    I refused to participate in a family adult grab bag a few years ago. It had devolved into buying each other $50 gift cards that the person requested. And what is even the point then? All but 1 person were thrilled I finally said something. And it caught on – we stopped another and several people have told me they stopped with their in-laws too. Now we only do one for the kids and their cousins – a small toy for each kid under 10.

  • Bill___A

    All banks aren’t bad and all credit unions aren’t good. Wells Fargo had an issue lately but that doesn’t mean everyone should stop doing business with them.

  • MF

    Not to apologize for the name at the top, but we are ALL not perfect. Why else do we need a right to privacy (or a consumer advocate)???

  • redragtopstl

    Yeah, the “3rd party” thing raised both my eyebrows for a moment there too. When I saw “Wells Fargo”, one eyebrow stayed up.

    Having said that … I also get gift cards through a 3rd party, but have never had the problem Chris described. From time to time, when we accumulate enough points with our Discover Card, we redeem them for restaurant gift cards (usually Red Lobster). Never had a problem using them.

    We have also given people gift cards to other restaurants as a “thank you” for services rendered, but those are purchased directly from the restaurant. In the past, I have purchased Starbucks gift cards as a Christmas gift for my (now former) hairstylist/manicurist from Bed Bath & Beyond; apparently she didn’t have a problem with those, either.

    Chris must have drawn the short straw the day he bought his gift cards.

  • LDVinVA

    I don’t call millions of phony accounts “an issue”. And now there is something in the news about mortgage processing delays on their part and charging their customers for the late closings. Wow.

  • John Keahey

    And why is he even considering using a loyalty perk?

  • Hanope

    While it certainly does seem more convenient to buy gift cards at the grocery store, I still tend to just go to the store itself to buy one directly, it always has just felt safer. Obviously can’t do that with Amazon or iTunes, though.

  • Bill

    Amen Rebecca … throughout the year, my wife and I pick things out for ourselves (that we would probably normally buy anyway) and give them to each other for Christmas. We just do a card and maybe dinner/dessert requests for birthdays. I despise the made-up holidays like Valentine’s Day but, on the other hand, love St. Patrick’s Day because I get to have boiled dinner and Guinness (love being Irish!). When our siblings had children, we stopped buying for the siblings (for the most part). My wife and I differ on the significance of birthdays/anniversaries … I feel that they are just a number with no more significance than any other but she looks at the “milestones” as important. The only birthday of mine that I crowed about was when I turned 42 … because I spent a year being the answer! Otherwise, they are all just numbers …

  • Rebecca

    I get flack from my family ALL the time because I actually forgot my 10 year anniversary last year. We don’t ever do anything for anniversaries, and neither of us realized it was our anniversary until my mother-in-law texted us. Apparently it was OK for my husband to forget, but not me. Go figure.

  • Annie M

    I recently bought a Costco gift card as a gift. I had every intention of making sure to buy one that had the pin number completed covered but guess what – every single card had the pin number completely exposed! No scratch off, not covered with anything – all exposed. So I gave the receipt with it and prayed that it worked.

    I’d like to know about the multiple complaints you have on your forums about Amazon invalidating not only cards but accounts too.

  • sirwired

    Thousands of employees committing identity theft with the “see no evil” tacit approval of corporate goes beyond “an issue”. (Especially given how the new CEO was the direct boss of the employee they chose to scapegoat for the whole mess.)

    And while not all credit unions are good, all else being equal, there’s a higher chance they will have customer-friendly policies than a bank. (This is borne out in countless studies.)

    As a consumer, there’s really no compelling reason to bank at a bank unless there are truly zero adequate credit unions in your area.

  • LDVinVA

    I so agree. A few years ago my well-into-adulthood daughter and I realized we were simply exchanging gift cards on the birthdays and Christmases we are not together. We simply stopped that. Of course my grandkids get gifts even if I am not with them. A friend exchanges gift cards with many cousins and her suggestion that they stop this practice was met with derision. I don’t get it.

  • AAGK

    I recently left Wells for Chase Private Client and I wish I made the move sooner. The wells issue didn’t affect me but it gave me the motivation to look into more better options.

  • AAGK

    Why not? The perk is incidental to his normal use. He’s not basing his life on them.

  • Harvey-6-3.5

    You can order Amazon gift cards directly from Amazon. That’s how I gift my nieces and nephews. If you are in a real rush (same day issue), you can send it electronically, otherwise you can have it delivered. I don’t know about iTunes, but I bet there is at least an electronic gift card.

  • sirwired

    Which is what people say whenever Chris writes an article about how loyalty and reward programs are just the worst thing ever, despite the fact that most members treat them exactly like this.

  • AAGK

    No one has addressed the most controversial part of the story. If you receive a gift card for free or return something someone bought you in exchange for a store gift card, then use those cards to buy others people gifts, is that considered re-gifting?

  • AAGK

    St Patrick’s Day is my favorite holiday.

  • AAGK

    I agree but I have to confess, I just signed my dog up for BarkBox and he goes crazy for this stuff, as do I. It is really cute. I will hang my head in shame.

  • PsyGuy

    I love that “Gift cards are more like businesses that decide to legally print their own money and make up their own rules about it”. Honestly, I hate gift cards and it’s really hard to find them in Japan. Of course they exist but the rules are very different. Essentially the difference is this, whoever has the receipt of activation owns the card and the value on it. This is why gift cards in Japan in most cases must be activated online with the activation code on the receipt. The real difference is that Japan just isn’t a gift card society, there is nothing tacky about giving yen as gifts (usually in red or colored envelopes).

    What baffles me is how Chris can do his banking with Wells Fargo after the “incident”???

  • PsyGuy

    There is an E gift card for iTunes.

  • PsyGuy

    I agree, but we live in a society now where everyone thinks they are a special snowflake. Millennials are the worse, they just think they are so special that everyone cares about the food they are eating and justifies a photo.

    I do understand however the need to buy adults gift cards from a business/work standpoint. We give holiday and birthday cards and it’s just what we do, often through COSTCO, because you can pay less than the value you receive. Our director keeps about 100 of them in his lock box for birthdays, then she doesn’t have to buy a gift, she just opens the box takes one out (always Starbucks) and writes their name on it, and a quick message and done. Takes a minute, and the option would be getting nothing. It’s the same thing at Christmas, in fact you can tell how valued you are by the value of the gift card, it’s better than a performance review. Get a $100 card and you did very, very well. Get $25 and your average. Less than $25 and you have a problem. $5 means start putting your resume out and resign.

  • PsyGuy

    Don’t forget recently being thieves.

  • PsyGuy

    Yes it’s considered regifting.

  • PsyGuy

    Yes it does, there issue wasn’t a backed up sewer line, it was strategic organization wide fraud and theft.

  • PsyGuy

    I love private client. I am one as well.

  • PsyGuy

    This I have to disagree with and it’s in the case of international banking. My CU can’t provide me nearly the services that my bank does.

  • One of the reasons businesses do not want to add security to gift cards is avoiding escheatment laws. If they collect names and addresses from gift card owners (recipients), then they may be subject to escheatment in states where the individual gift card owners reside. But, if they don’t collect the information, they are typically subject to the laws where the gift card issuing company is located. This is why gift card issuing companies are always located in friendly states like Washington, and companies located in states with unfavorable laws can just register their gift-card-issuing shell company in a friendly state.

    http://www.consumerproductslawblog.com/2015/01/delaware-expects-retailers-with-unclaimed-gift-card-balances-to-pay-up/
    http://apparel.edgl.com/news/Unused-Gift-Cards–A-Ticking-Time-Bomb-100239
    http://www.journalofaccountancy.com/issues/2008/dec/statesbiteintobrokengiftcards.html

  • PsyGuy

    Well yeah….

  • The Original Joe S

    Welles Fartgo took over my local bank, where I was for 35+ years. Then they shafted me. Went right there, emptied the safe box, walked out. AMF.
    Welles Fartgo tried to shaft a friend of mine on a mortgage re-fi while he was overseas. The woman at WF kept asking for same paperwork again and again, even tho they already had it. Trying to scroo him out of the interest rate lock. Strong e-mails from him made them back off. I dunno if he dumped them or not.
    I use my credit union. I have the cell number of the CEO. They’re supportive.

  • Lee

    The only ones I will ever buy at this point are ones from American Express – so far, so good. But, I only buy even them if there is a reason I am unable to do something other than such a gift. I like the Amex ones because they can be used where they take Amex cards – so it is not limited to one vendor.

    But – I have been burned enough by other such cards/problems with them that I rarely even do the Amex ones out of trepidation

  • Rebecca

    That’s totally different. Using gift cards for employee contests, sales goals, birthday and Christmas gifts is fine.

    They’re taxed differently. I know this because my husband’s boss was talking about how some employees received $100 gift cards for Christmas and I asked the stupid question why they wouldn’t just give the employees and extra $100 on their paycheck, which I’m sure most people would prefer. I believe they also give birthday gift cards, because I remember my husband swapping his restaurant card for a grocery store one, since the couple restaurants they had neither of us particularly like. But we both like real food.

  • Rebecca

    Totally different. That falls into the category of cute things that get excited. I have a very spoiled dog.

  • PsyGuy

    So we’re agreeing with each other?

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