Why do these gift cards keep disappearing?


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. 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, it not only cancels the cards but also often keeps 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


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.

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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 to endure those losses?

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.

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.

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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.

I’m republishing this cautionary tale so you don’t make the same mistake this holiday season. Please heed my warning.


Christopher Elliott

Christopher Elliott is an author, journalist and consumer advocate. You can read more about him on his personal website or check out his adventures on his family adventure travel site. Contact him at chris@elliott.org. Read more of Christopher's articles here.

  • BubbaJoe123

    Next year, use the Amazon gift card from Wells Fargo yourself, and buy your mother a card directly from Amazon.

  • SirWired

    What would be the purpose of a smart chip in a gift card for an online store?

  • MarkKelling

    No purpose at all until yiur online access device starts having a built in card reader for chip cards.

  • AJPeabody

    When I give a gift card, it’s a Visa cash card purchased from my bank, and there is no fee.

  • BubbaJoe123

    Why not just give actual cash?

  • Alan Gore

    The only third party you should ever buy gift cards from is a local store whose customer service you trust. Your bank can fit this criterion, if it’s sales-oriented and has people at your branch who are motivated to help you if needed. In my experience, Wells Fargo is competent but not very friendly. At least that’s better than incompetent AND unfriendly (B of A).

  • BubbaJoe123

    As long as you’re taking reasonable precautions, buying gift cards online can be a great deal. Just make sure that you’re going to use the cards within the span of the guarantee that the site provides.

  • greg watson

    I have given Starbucks….Tim Hortons……Chapters & a few other cards……….which I buy directly from their stores……….keep my receipts & enclose them with the gift card………….never have I had a problem

  • Extramail

    I went online, printed the logo of the store my son wanted a gift card from, put cash and the logo in a wrapped box and gave that to my son as his Christmas present. In the past, I have also just taken him shopping after Christmas and let him pick out what he wanted with the amount I wanted to spend. That way, he got to pick out more clothes and we had the pleasure of spending some time together.

  • Fishplate

    My new laptop has a card slot – it’s for my security token, but it looks the same as a chip card. I’m pretty sure it would work as a card reader.

  • RichardII

    It depends on the chip technology. At a minimum, it would add around $1 to the ćost of the card. If it was a CHIP+PIN, it would be fairly secure. But, if it was a CHIP+SIGN it would only prove the card had been physically present for the purchase, and do nothing fo online or phone purchases.

  • SirWired

    With no way to read the chip, it doesn’t do anything at all. A card can have a PIN without a chip.

  • RichardII

    That is true. But, if the PIN is actually stored in the chip, then it cannot even be unlocked without the PIN. But, as you note, that only works where the card and owner are physically present at the card-reader.

  • Byron Cooper

    There are situations where a gift card makes sense. Audio Digest, for example, which is a Continuing Medical Education, “CME” entity, will occasionally give you gift cards for Apple and Amazon when you renew. Audio Digest has been around for decades and I never had a problem when I got a gift card from them. I need the CME anyway, with or without the gift card. Amazon gift cards, purchased directly from Amazon or a local drug store or grocery, is good for a last minute present. If there is a problem with the gift card, you always have the option of going back to the grocery or drug store.

  • Bill___A

    This is an odd story because the normal advice I expect would be given would be to buy the gift card from a reputable seller and make sure it is for a reputable (and stable) business. I think the problem Mr. Elliott experienced was somewhat different than when people buy cards at a “discount” from shady sites. There are timed when a gift card makes sense, such as when you don’t want to give your credit card, or the person making the purchases doesn’t have a credit card – and once is normally required, such as Apple, X-Box, Play Station, etc. Or when someone has moved to Peru and doesn’t have a credit card but wants to get books for their kindle. To me, this is a different kind of “gift card” use than getting a target gift card or one for a specific restaurant chain. There are also promos where some businesses give away free sub sandwiches with gift card purchases. Another situation is where you buy a homeless person a coffee or food and you want to give them a coffee “gift card” then you can do it, and they can get a hot coffee later when you’re not around – which also gets them into the warm business. Gift cards are good in this case, and useful. However, if you are just trying to get one deeply discounted at a venue where scams are frequent and risk is high, then you’re asking for trouble. Like anything, if there is a legitimate purpose, and you are going to have a legitimate benefit, and there is a “fallback” in place in case there is a problem, then it is fine. If not, it is trouble.

  • KanExplore

    I was wondering the same thing. They automatically enrolled Chris in their rewards program which may be harmless enough. But that’s not the only kind of account they’ve been enrolling customers in without their knowledge and consent. Sure they fired a few people, but management must have motivated and enabled that culture. And until I see that they are more than just sorry they got caught, I wouldn’t deal with them.

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