One thing I didn't think Patrick quite explored enough: there's a big difference between someone asking you to pay using a gift card and you asking to pay using a gift card.
The examples he gives are predominantly around giving people the option, while the scams are very much pushing a requirement.
If someone wants you to get a gift card to pay them, and won't take cash or credit? Scam. If you have a gift card already and someone's willing to accept it in lieu of cash? Probably no more likely to be a scam than any other vendor?
I completely agree. I struggle to think of any legitimate business that would allow only gift cards. Maybe some privacy oriented VPN providers?
In any case, I think this is almost a willful misunderstanding. Not only does it attack the straw man of "no one ever gets legitimately paid in gift cards", but literally the first counterexample, Paysafecard, isn't a gift card!
I work with someone who does payment for adult sites etc and even though they do offer Paysafecard not a ton of revenue is generated through them, because fees for the creators are quite high and I guess it's just inconvenient.
Most people who want to spend their money just do it using credit card, bank transfer, whatever.
And note that in the VPN situation the customer is the one initiating the transaction. I want X, the only acceptable payment is a gift card--the person buying the gift card knows that it's specifically being done to make it very hard to track the transaction. That's a very different thing than someone demanding a bill be paid via a gift card.
Blizzard runs several popular games where you need to buy their currency before you can buy anything. I don’t know if it’s the case anymore, but Microsoft used to require Xbox Gold to purchase games.
Usually this requires locking more up than the purchaser intended to spend.
OTOH even as someone who played a popular online Blizzard game for years (and realistically spent a decent amount of money on it), maybe it's not the worst thing in the world if this sort of think becomes considered more "scam" than "legitimate business model". There's almost never a direct 1:1 ratio between the real money you convert into the currency and the price of the thing you want to get (which isn't that surprising, as it would probably be pointless to ask someone to put in $20 to convert to widgets only to immediately ask for all of their widgets for the item they want rather than ask for the $20 directly), which means you either buy more than you intended or hold onto it in the hopes that you can put it towards something else you want later. What percentage of people who have ever bought one of these currencies do you think don't currently still hold some due to having leftover from their most recent purchase? What percentage of people have bought some and later stopped playing the game managed to spend all of them before they stopped? All of those people have basically been taken advantage of IMO (probably knowingly, but that's hardly an excuse when there's a power imbalance). Even if the relative injustice is small compared to other things in the world, it would still probably be better for business models like that not to exist.
(edit: in retrospect "OTOH" was a poor choice of words since this isn't really a different point than the parent comment is making)
AFAIK in most games or storefronts with a real-money exchange pipeline, the resulting units are simply not gift-able. Being unable to exchange value with other users makes it qualitatively different.
In other words, you spend regular money for company-points, but thereafter you can only spend the company points on things that cannot be transferred. While there is certainly a cynical aspect to locking up customer funds, it makes it a lot easier to handle things like fluctuating currency exchange rates, and simplifies refunds within the points-store.
On the other hand, it's trivially true that the store which "issues" (caveat explained in the article, they don't actually issue anything themselves) a gift card will accept it as a valid form of payment.
It sounds like the way the parent front is phrased fits that. If they're only willing to pay in gift cards, that's a requirement, so it's likely a scam. If they're also willing to pay in cash, then you can probably just take the cash and be fine?
> This is exactly the behavior that “never happens from a legitimate business” except when it does by the tens of billions of dollars.
> As Bits about Money has frequently observed, people who write professionally about money—including professional advocates for financially vulnerable populations—often misunderstand alternative financial services, largely because those services are designed to serve a social class that professionals themselves do not belong to, rarely interact with directly, and do not habitually ask how they pay rent, utilities, or phone bills.
This resonated for me, and reminded me of the way I and my formally-banked and formally-employed colleagues sometimes struggle to wrap our minds around payday lending (sure looks like usury from the security and comfort of a formal banking relationship!), remittances, hawala, pawn shops, Cash App, gift card exchanges, video game economies… for all the normative thinking in the professional classes, people sure do develop a kaleidoscopic array of approaches to storing and transmitting value.
“Just sanction [whoever]” or “just debank [whoever]” sounds to certain circles like an appealing tool to have—the modern equivalent of exile—but I have to imagine it’s probably healthy that such a tactic is hard for a state actor to apply in a totally watertight kind of way.
Rarely does it look like a clear "debank X" system; it's more like "you look suspiciously like someone who might use our systems in a crime, in a way that will cost us money and get in trouble with the law, so we're not going to touch you". Which is much harder for an innocent person to deal with.
I do think there ought to be some sort of fallback banking and account denial review process, if we're going to make it that critical to society.
I agree, that’s what makes it so insidious: it’s murky how you get flagged as risky, and you normally don’t even see the evidence (if any!), much less have a means to appeal. Which would be one thing if financial institutions’ risk decisions were independent, but they’re not—see again the inimitable @patio on this [0].
That serves the integrity of the risk-identification system by making it harder to game or evade, but we’re rightly allergic to other forms of justice meted out “because trust me, he’s probably no good…”
It's clear, from watching Russia fail to be completely sanctioned that this is not watertight. The question I have is: have these sanctions added a money laundering tax to doing business? How much? What is the cost of enforcing the sanctions vs the added cost and is that worth it?
I don't know if this has been explored, bit I think it's an interesting follow on to "all or nothing" watertight sanctions.
Yes, that's pretty much the main goal with sanctions (and things like export controls): no-one expects them to be impossible to work around, but they should impose some (ideally very large) extra costs and limit the scale. For some things this is more or less built into the regulations with de-minimis rules that tacitly cap the cost multiplier at 10x or so.
On a national scale sanctions aren't there to stop a country from doing things or forcing regime change. They're there to cost enough money to circumvent that it robs them of growth over time to make them into a non-threatening poor backwater over a decades long period.
This is basically what the US did to most of its "makes actual stuff" economy over the past 50yr.
When it comes to banking laws and the like it's not about being watertight. It's about holding enough water that what leaks out is small enough you can crush it with the state jackboot without enough collateral damage to really piss people off and that the cost of circumvention is high enough that you can't make "real money" outside the law at scale.
Nothing at all, unless you’re someone who doesn’t have family in a different country. In which case it may not have occurred to you that it’s even a thing, with its own rules and hazards and ways things are done.
Even if you’re such a person in the professional class, who sends money back to their family via formal means, you might not be sensitive to the means informally-employed people use to send money (or value) back to their families.
Any more than it occurs to you to go to a payday lender and pay $5 to get $50 today against your $250 paycheck next week, in order to make rent…
The general scamminess around gift cards is far too high from all angles.
Anyone asking you to pay them in gift cards is a problem. The gift card processors have all manner of ways to preserve the float by flagging "fraud" in order to suspend your gift card until you waste time and give them personal information. The company behind your gift card can go bankrupt (see: Bed, Bath and Beyond and Fry's). And, finally, as we found from Apple, even redeeming a card can cause you problems.
Give cash. In spite of some hoity-toity nitwits who consider cash to be gauche for gifts, at no point in my life have I ever be disappointed to be given cash.
> In spite of some hoity-toity nitwits who consider cash to be gauche for gifts, at no point in my life have I ever be disappointed to be given cash.
If you are one of those people afraid to give cash, here's what you do: go to the bank and ask for fresh bills. (You can also iron them yourself, I think.) I know of absolutely no one who would turn their nose at a fresh, crisp $100 bill, and it's not like $20s or $50s are much worse even if the $100 is king. They're just really satisfying when they're brand new.
when my boss gives me money that is taxable and requires paperwork to ensure they are paid. My boss can give a gift card for small amount though (small is important)
It's interesting (to me, at least) to see the kinds of discounts that folk apply to gift card transactions. It's not unheard of for a colleague to end up with a gift card they can't use, and while there's a real sense in which the card is worth its face value, there's also a sense in which its restricted use makes it worth less than face value. Plus, if you want to spend £x in a shop then you don't normally need to buy a colleague's gift card.
It is, however, literally worth that amount of cash at the moment of redemption. If you were going to spend that money in that shop anyway, and you have no intent to sell the card to a third party, there's no need to apply a discount.
It's not all that surprising that "just like cash, but less fungible" should have a different valuation than "cash", but there aren't all that many things that mimic cash like that.
If you look on the gift card market places, like Raise, you will see many gift cards are well below face value but there are also many that are rarely below 1% value like Amazon and Walmart.
I'd take the cash. I walk past a half dozen cash machines on any given workday where I can deposit the cash in to my bank account and it'll clear and be ready to spend instantaneously.
the first thing I always did when I got a visa (or like) gift card (be it rebate, class action payment et al), was put it into amazon, as it was effectively cashing it out with close to zero friction.
I have started new jobs twice once in 2023 and once last year and before my first day on the job I got a text from the CEO of the company asking me to buy gift cards for them and they couldn’t do it themselves because they were in a meeting.
They said the CEO by name and texted my number. Of course it was a scam that had nothing to do with my CEO. I wonder how they got my number?
I’ve had these, they would have got the CEO from LinkedIn and my number is googleable from having resumes online. Someone is doing this reconnaissance on different companies.
Did you confirm it was a scam? Primarily wondering if it's possible that the company itself contracted someone to do phishing test for new employees. I know there are plenty that do email version of this.
I got these around the same time frame. The funny thing is that the named CEO was for a company I'd left the year prior. I was still in touch with coworkers from that company, and they told me that it wasn't a training exercise by the infosec team. The infosec team had actually warned people about it after hearing about people getting those texts.
I would hope they don’t do that before I start using my personal number.
If someone did fall for it, the potential that your employees would spend real money that they wouldn’t get reimbursed for would definitely piss a lot of people off.
If they did it I would assume they would do it in a way that the employee would need to get some information first (e.g. the amount or type of gift card) before committing to anything. Or directing to buy it from some fake web shop.
Ceo scam is very common. Anytime someone claims to be a ceo verify! CEO is a popular target because they have power and can request weird things of employees who don't know them in normal business.
I know. That's why I wondered if some companies had started running training exercises for the phone variants. Personally I have only encountered the email ones previously.
of how thieves were abusing gift cards by imaging them in stores, waiting until purchased and "holding" value, then extracting that value with a little bit of cracking bad security
I would not have believed for a second if stores here in my location in the U.S. did not recently begin locking up gift cards in a cage. I thought the move was quite odd, until I remembered a story that I read (possibly here?) about specific types of imaging that could see the pin behind the scratch off part.
Originally I assumed it was due to customer education/fraud, however no additional signage is posted at the stores doing this. Second thought was people must think these cards are already activated, however there is tons of text stating these things are only activated at POS.
The retailers I mentioned are nationwide. However, they've only recently began to do this, and only in a few locations that I am aware of.
This guy purchased a gift card which turned out to be dodgy, and Apple locked his entire account. So there's definitely some kind of shenanigans possible with the current supply chain.
For the past year, single chinese tourists have travelled around the country emptying stored of nearly any kind of gift card. Its some kind of money laundering scheme I think? So recently stores in affected areas started locking up gift cards, though its hard to stop as buying all gift cards isnt really illegal
For as much as this article harps on the "AARP Lie" i.e. how gift cards can be used by "unbanked" customers on "alternate financial services platform" the first thing I advise seniors to do is AVOID those platforms because of the same exact lack of regulation problem. Paypal and Venmo might give you the run around when it comes to your money but banks don't have that kind of option.
I always felt that gift cards are the underbelly of the economy. I don’t think that’s an accident, these things are great ways to move money and pay casual labor without the red flags that cash throws up these days.
One time I got a car detailed, and when I was paying at the end, I noticed that the employee was writing out a receipt and marking that I had paid with a gift card. I don’t remember if I was paying with cash or a credit card, but either way I figure some sort of tax evasion and/or money laundering scheme was happening.
This book [1] from 2011 by Kevin Poulsen about the carder Max Butler (alias Iceman). Runners would use his copied CCs (which he acquired via cracking into conputers) to buy gift cards in physical stores. Nowadays we got CVV (CVC).
Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs). I’ve also noticed (perhaps this is not recent though) the max cash limit at some ATMs reduced from $500 to $400. If you purchase $1000 or more in USPS money orders, the rep will take a copy of your government identification.
How would gift cards circumvent this? Dollar for dollar I can only imagine a transaction getting more attention if done in gift cards, certainly one over 10k probably isn’t even possible
You buy gift cards with other purchases and pay people under the table. The gift card is cash-like for stores like Home Depot or Walmart.
You can also do stuff like get paid with someone else’s Cash App (like grandma’s) and then buy gift cards with it. If you hire “independent contractors” for casual labor or construction, many of them do that. The gift card transaction is just another CVS/Mobil purchase.
It’s not just tax evasion, sometimes they are avoiding child support or garnishments. Other times folks are just unbanked for some reason. You get blacklisted from banking you do something stupid.
This might be why Apple Gift cards can lock you out of iCloud [1] since they are using a 3rd party. People at Apple who are intermediaries have strict rules not to unlock due to fraud and those processes can’t be undone easily?
What is the core argument why a gift card would ever be used instead of cash?
I can see if someone didn’t have any money and had a card and wanted to try and sell or exchange it, otherwise? Cash might have some limitations but none that are worse than a gift card.
Cash requires in-person exchange. To use it electronically, you’d need to participate in the formal banking sector. Many people can’t or don’t.
Instead you can take your cash to any of a large number of retailers and acquire a card that sits outside the tight credit/debit-card regulations. That card, thanks to the wide reach of various multinational corporations, has broad (and cross-border) value and is suitable for electronic exchange. All that in exchange for a small(ish) tax (the price of the card plus whatever discount the recipient/exchange applies to its face value), and less recourse if you’re scammed or you screw up somehow.
Incidentally you might be interested in @patio’s description [0] of Japanese konbini (convenience store) payments. There, your remote payee gives you a transaction number. You take that number to your local convenience store and hand them the cash to complete the otherwise-electronic transaction.
In addition to other credit/debit-card regulations, gift cards generally don't support "charge backs" (as they generally don't have the infrastructure of the full credit card system and the merchant banks) so can be in some cases used as an exploit for future fraud with the receiving vendor.
I’m wondering if this is the primary use case and that’s why I don’t really get it? I see the online aspect, but it comes with a whole other set of problems that for most cases it’s hard to imagine are easier to deal with than exchanging cash. But a way to send money across borders without any controls I can see why that might be popular. Hard to tie that back to advice the AARP should be giving though.
Some of the prevalence of gift cards in corporate culture is loopholes and silliness in tax codes and anti-bribery laws. Giving any cash to an employee counts as bonus income and needs tax withholding. Giving gift cards under certain values to an employee is a gift to the employee that doesn't count as income (and, worse, in some cases can be expense reported for a tax advantage as a cost of doing business, especially gift cards to restaurants where it may be assumed it is for a "business meal").
In a different direction, giving cash to a partner/vendor/competitor is pretty obvious to many laws as a bribe. Giving gift cards more resembles gifting swag or paying for a meal and is sometimes considered "allowed". Different companies have different views on that loophole, but some companies do take advantage of it. Enough companies at least did at one point that the "CEO is in a high-powered meeting and needs gift cards immediately" came from somewhere and it was probably that, wining and dining partners/vendors/competitors in "legally distinct from but quite resembling bribes".
Gift cards are one of the dumbest most brain-dead pieces of scam ever invented. With all kinds of restrictions that resemble "scrip" type payment systems. They only exist to increase a larger entities control over you.
Why take perfectly good cash and change it to something worse in every way? I cannot understand why so many people enthusiastically go out of their way to buy gift cards. Can you take my cash and convert it to something with the same function but with all kinds of restrictions and gotcha's? Sure no problem....
One use for them is to obfuscate my banking information. A few years ago, Sony leaked a ton of Playstation customer information. Since then, if I want to buy games from them, i buy a gift card from someone else, and then use the gift card. It adds a layer of indirection.
I can get gift cards for my groceries and fuel with a permanent 4% discount. I'm going to spend the whole amount there anyway - what wouldn't I use that path every time?
Paranoia of the war on drugs is part of it as well. Some are afraid that kids with large sums of cash would spend it on drugs or alcohol and it is more difficult to barter giftcards for drugs.
Not a good reason but it is a real one I have heard.
Oof. Of course Patrick is right that paying by gift card isn't always a scam, but I think less-technically-savvy people are better off just believing that it is. And hell, as a technically-savvy person, I will just believe that it is as well, because it's less effort to do so, and won't hurt me to believe that. If someone wants you to pay for something by gift card, find the same or a similar product somewhere else, where they'll take credit/debit cards, checks, cash, whatever is actually legal tender and is appropriate for the situation.
But from Patrick's description, it feels like the situations where it's (usually) not a scam are instances where paying by gift card is an option, not something the "seller" is pushing you hard to do, or even requiring you to do. That seems... okay? I personally would still pay with a credit card, but mayyyybe it's ok for someone who can't get a credit card to go the gift card route. But I would still be wary.
If you're dealing with an unbanked business that cannot take credit/debit cards or checks due to the legal climate around their business or product, then you probably already know what you're getting yourself into. (But still, bit of a red flag if they don't accept cash or even cryptocurrencies, as much as I find those scammy as well.)
> The people of the United States, through their elected representatives and the civil servants who labor on their behalf, intentionally exempt gift cards from the Reg E regime in the interest of facilitating commerce.
This sort of phrasing about things kinda annoys me. Yes, "through their elected representatives...", technically true, but "the people of the United States", no, not really so much. I'm sure most people don't even know about these sorts of differences, and I'm sure the majority of people who are in favor of these sorts of protections on credit/debit cards would want them to apply to gift cards as well.
The problem with this sort of phrasing implies that the American people actively chose this, or even had any choice in the matter. We are limited in the political options that are put before us; we don't get a big menu of policy positions, check off the ones we like, and then a politician appears that matches all our preferences. Some people might -- very reasonably! -- prioritize other policy positions over gift card protection regulation, even if they want the latter as well.
I've got some gift cards sitting here--her health insurance has rewards for doing certain things, there's no way to get them as cash but you can buy gift cards for certain stores. Nothing scammy about it but I'm annoyed Amazon isn't an option because simply dumping them into my Amazon account would be the easiest solution.
> . Paysafe, for example, is a publicly traded company with thousands of employees, the constellation of regulatory supervision you’d expect, and a subsidiary Openbucks which is designed to give businesses the ability to embed Pay Us With A Cash Voucher in their websites/invoices/telephone collection workflows.
I thought so as well. It also confuses me the more I think about it… it seems like they have all of the things a normal bank has, so why isn’t it just a bank? What is preventing them from just offering a bank account to people who are traditionally unbanked?
> very likely made it impossible for anyone at BigCo to reconstruct what happened to a particular gift card between checkout and most recent use.
Could I improve my own privacy posture by just buying myself gift cards, if I can't use cash? Or that's just pushing all the data that the store would get onto the gift card company?
> The American Association of Retired People (AARP, an advocacy non-profit for older adults) has paid for ads on podcasts I listen to. The ad made a claim which felt raspberry-worthy (in service of an important public service announcement), which they repeat in writing: Asking to be paid by gift card is always a scam.
>Of course it isn’t. Gift cards are a payments rail, and an enormous business independently of being a payments rail. Hundreds of firms will indeed ask you to pay them on gift cards!
That’s where I stopped reading. The author seems more interested in being contrarian for clicks than in giving practical advice. AARP is right here: being asked to pay by gift card is a major red flag, and unless you know the company personally, it’s time to walk away.
Patrick very carefully declined to give examples of such legitimate yet debanked businesses. Presumably because they're all grey market stuff that sets off a whole other "wait, is that legal?" conversation.
I have never seen a legitimate business asking for payment in gift cards. I've encountered the traditional tradesmen offering discounts for cash, though.
Edit: I think he may actually be talking about businesses accepting payments in their own gift cards, which is so obvious that it's easy to forget. It's not a scam when Apple ask you to pay in Apple gift cards. It's just the only non scam such case.
I don’t think he is talking about businesses that accept payment in other gift cards… he has a footnote explaining the type of business he is talking about.
I've used 3rd party retail gift cards to pay for consumer VPN service, which is only "grey market" because privacy is often criminalized. But I still 100% agree with what the AARP is saying. This is one of those things that sure, there is technically an exception, but by the time you get to the level of knowing enough to know when that exception applies, you end up agreeing with the common advice.
I’m the kind of nerd who enjoys the surprising nitty gritty details, so I enjoyed the rest of the article and I’d recommend people read it.
But I agree with you: the AARP is 100% right to be running PSAs like this. I’d be curious to hear more about how a shadow economy like this would/would not help unbanked people, which he implies but did not describe at all. But it certainly doesn’t change the point that gift cards are an effective vehicle for fraud, and anytime someone asks to pay you (or especially you to pay them) in gift cards… your scam senses should tingle.
Agreed. It's more practical to tell seniors that all gift card requests are scams rather than teaching them to identify warning signs, since legitimate gift card payments are so rare.
The world is full of people who, like you, seek any reason to not listen or read interesting things in favour of doing just about anything else. You don’t win a prize for being part of that group — at best, you saved as much time as it took you to write that comment. In exchange you are likely poorer for it intellectually because Patrick’s writing has an exceptionally high signal to noise ratio, and that signal is one most are not privy to.
At no point did the article claim AARP was in the wrong for running those ads. But had you kept reading you’d maybe have understood that wasn’t the point nor the premise in the first place.
In case it wasn't clear: I don't care what you do, I care that other people don't miss out on a good article because you flaunt your anti-intellectualism on HN.
I would call it "splitting hairs," which experts tend to do.
The practical reality is acknowledged at the end of the post.
Even if, technically speaking, using gift cards as a payments instrument is not a scam 100% of the time, anyone but a non-expert should behave as if it's 100%.
I am also an expert in the field of payments. The only thing that makes gift cards stand out from other transaction media is there are many fewer guardrails around them money movement wise.
I'd pretty much back up AARP on this one. Asking for payment by gift card should in the majority of cases put one on guard.
Author works in payments industry which issues and accepts gift cards, benefits from the lack of consumer protections, and incidentally doesn’t make any revenue on cash payments.
Is he an expert in the field of old people being scammed out of lots of money? Telling non tech-savvy people that it's ok to listen to the nice man on the phone and send him a lot of gift cards?
The only legit use of a gift card is when you’re redeeming that gift card directly with the issuer. No business is going to request or require that you do that.
America needs a Great Firewall for border security. Almost all scams and spam originate outside our country, and are out of the reach of our law enforcement.
We don't let terrorists and robbers wander in, why do allow the digital equivalent?
One thing I didn't think Patrick quite explored enough: there's a big difference between someone asking you to pay using a gift card and you asking to pay using a gift card.
The examples he gives are predominantly around giving people the option, while the scams are very much pushing a requirement.
If someone wants you to get a gift card to pay them, and won't take cash or credit? Scam. If you have a gift card already and someone's willing to accept it in lieu of cash? Probably no more likely to be a scam than any other vendor?
I completely agree. I struggle to think of any legitimate business that would allow only gift cards. Maybe some privacy oriented VPN providers?
In any case, I think this is almost a willful misunderstanding. Not only does it attack the straw man of "no one ever gets legitimately paid in gift cards", but literally the first counterexample, Paysafecard, isn't a gift card!
I work with someone who does payment for adult sites etc and even though they do offer Paysafecard not a ton of revenue is generated through them, because fees for the creators are quite high and I guess it's just inconvenient.
Most people who want to spend their money just do it using credit card, bank transfer, whatever.
And note that in the VPN situation the customer is the one initiating the transaction. I want X, the only acceptable payment is a gift card--the person buying the gift card knows that it's specifically being done to make it very hard to track the transaction. That's a very different thing than someone demanding a bill be paid via a gift card.
Blizzard runs several popular games where you need to buy their currency before you can buy anything. I don’t know if it’s the case anymore, but Microsoft used to require Xbox Gold to purchase games. Usually this requires locking more up than the purchaser intended to spend.
OTOH even as someone who played a popular online Blizzard game for years (and realistically spent a decent amount of money on it), maybe it's not the worst thing in the world if this sort of think becomes considered more "scam" than "legitimate business model". There's almost never a direct 1:1 ratio between the real money you convert into the currency and the price of the thing you want to get (which isn't that surprising, as it would probably be pointless to ask someone to put in $20 to convert to widgets only to immediately ask for all of their widgets for the item they want rather than ask for the $20 directly), which means you either buy more than you intended or hold onto it in the hopes that you can put it towards something else you want later. What percentage of people who have ever bought one of these currencies do you think don't currently still hold some due to having leftover from their most recent purchase? What percentage of people have bought some and later stopped playing the game managed to spend all of them before they stopped? All of those people have basically been taken advantage of IMO (probably knowingly, but that's hardly an excuse when there's a power imbalance). Even if the relative injustice is small compared to other things in the world, it would still probably be better for business models like that not to exist.
(edit: in retrospect "OTOH" was a poor choice of words since this isn't really a different point than the parent comment is making)
AFAIK in most games or storefronts with a real-money exchange pipeline, the resulting units are simply not gift-able. Being unable to exchange value with other users makes it qualitatively different.
In other words, you spend regular money for company-points, but thereafter you can only spend the company points on things that cannot be transferred. While there is certainly a cynical aspect to locking up customer funds, it makes it a lot easier to handle things like fluctuating currency exchange rates, and simplifies refunds within the points-store.
I would never accept payment from anybody in gift cards even if I frequented the store. I would assume it's a scam.
On the other hand, it's trivially true that the store which "issues" (caveat explained in the article, they don't actually issue anything themselves) a gift card will accept it as a valid form of payment.
Not 100% safe, even then https://appleinsider.com/articles/25/12/13/locked-out-how-a-...
It sounds like the way the parent front is phrased fits that. If they're only willing to pay in gift cards, that's a requirement, so it's likely a scam. If they're also willing to pay in cash, then you can probably just take the cash and be fine?
> This is exactly the behavior that “never happens from a legitimate business” except when it does by the tens of billions of dollars.
> As Bits about Money has frequently observed, people who write professionally about money—including professional advocates for financially vulnerable populations—often misunderstand alternative financial services, largely because those services are designed to serve a social class that professionals themselves do not belong to, rarely interact with directly, and do not habitually ask how they pay rent, utilities, or phone bills.
This resonated for me, and reminded me of the way I and my formally-banked and formally-employed colleagues sometimes struggle to wrap our minds around payday lending (sure looks like usury from the security and comfort of a formal banking relationship!), remittances, hawala, pawn shops, Cash App, gift card exchanges, video game economies… for all the normative thinking in the professional classes, people sure do develop a kaleidoscopic array of approaches to storing and transmitting value.
“Just sanction [whoever]” or “just debank [whoever]” sounds to certain circles like an appealing tool to have—the modern equivalent of exile—but I have to imagine it’s probably healthy that such a tactic is hard for a state actor to apply in a totally watertight kind of way.
Rarely does it look like a clear "debank X" system; it's more like "you look suspiciously like someone who might use our systems in a crime, in a way that will cost us money and get in trouble with the law, so we're not going to touch you". Which is much harder for an innocent person to deal with.
I do think there ought to be some sort of fallback banking and account denial review process, if we're going to make it that critical to society.
I agree, that’s what makes it so insidious: it’s murky how you get flagged as risky, and you normally don’t even see the evidence (if any!), much less have a means to appeal. Which would be one thing if financial institutions’ risk decisions were independent, but they’re not—see again the inimitable @patio on this [0].
That serves the integrity of the risk-identification system by making it harder to game or evade, but we’re rightly allergic to other forms of justice meted out “because trust me, he’s probably no good…”
[0] https://www.bitsaboutmoney.com/archive/debanking-and-debunki...
It's clear, from watching Russia fail to be completely sanctioned that this is not watertight. The question I have is: have these sanctions added a money laundering tax to doing business? How much? What is the cost of enforcing the sanctions vs the added cost and is that worth it?
I don't know if this has been explored, bit I think it's an interesting follow on to "all or nothing" watertight sanctions.
Yes, that's pretty much the main goal with sanctions (and things like export controls): no-one expects them to be impossible to work around, but they should impose some (ideally very large) extra costs and limit the scale. For some things this is more or less built into the regulations with de-minimis rules that tacitly cap the cost multiplier at 10x or so.
On a national scale sanctions aren't there to stop a country from doing things or forcing regime change. They're there to cost enough money to circumvent that it robs them of growth over time to make them into a non-threatening poor backwater over a decades long period.
This is basically what the US did to most of its "makes actual stuff" economy over the past 50yr.
When it comes to banking laws and the like it's not about being watertight. It's about holding enough water that what leaks out is small enough you can crush it with the state jackboot without enough collateral damage to really piss people off and that the cost of circumvention is high enough that you can't make "real money" outside the law at scale.
> struggle to wrap our minds around [..] remittances
You have family you care about back in your home country, so you send them money from your better-paid foreign job - what's confusing about that?
Nothing at all, unless you’re someone who doesn’t have family in a different country. In which case it may not have occurred to you that it’s even a thing, with its own rules and hazards and ways things are done.
Even if you’re such a person in the professional class, who sends money back to their family via formal means, you might not be sensitive to the means informally-employed people use to send money (or value) back to their families.
Any more than it occurs to you to go to a payday lender and pay $5 to get $50 today against your $250 paycheck next week, in order to make rent…
If I were the AARP, I'd go further.
"Don't buy gift cards. Full stop."
The general scamminess around gift cards is far too high from all angles.
Anyone asking you to pay them in gift cards is a problem. The gift card processors have all manner of ways to preserve the float by flagging "fraud" in order to suspend your gift card until you waste time and give them personal information. The company behind your gift card can go bankrupt (see: Bed, Bath and Beyond and Fry's). And, finally, as we found from Apple, even redeeming a card can cause you problems.
Give cash. In spite of some hoity-toity nitwits who consider cash to be gauche for gifts, at no point in my life have I ever be disappointed to be given cash.
> In spite of some hoity-toity nitwits who consider cash to be gauche for gifts, at no point in my life have I ever be disappointed to be given cash.
If you are one of those people afraid to give cash, here's what you do: go to the bank and ask for fresh bills. (You can also iron them yourself, I think.) I know of absolutely no one who would turn their nose at a fresh, crisp $100 bill, and it's not like $20s or $50s are much worse even if the $100 is king. They're just really satisfying when they're brand new.
Trust me, no one will complain.
From European perspective preference really is 5x20>2x50>1x100.
Both 50 and 100 euro bills are less desirable and often harder to spend.
when my boss gives me money that is taxable and requires paperwork to ensure they are paid. My boss can give a gift card for small amount though (small is important)
It's interesting (to me, at least) to see the kinds of discounts that folk apply to gift card transactions. It's not unheard of for a colleague to end up with a gift card they can't use, and while there's a real sense in which the card is worth its face value, there's also a sense in which its restricted use makes it worth less than face value. Plus, if you want to spend £x in a shop then you don't normally need to buy a colleague's gift card.
A gift card is always worth less than cash, how much depends on various factors.
At least 5% (rewards and inconvenience) but closer to 10-15% in my experience.
For a 20% discount on stores I use regularly I’ll get the gift card (usually buy $50 get $10 free).
It is, however, literally worth that amount of cash at the moment of redemption. If you were going to spend that money in that shop anyway, and you have no intent to sell the card to a third party, there's no need to apply a discount.
It's not all that surprising that "just like cash, but less fungible" should have a different valuation than "cash", but there aren't all that many things that mimic cash like that.
If you look on the gift card market places, like Raise, you will see many gift cards are well below face value but there are also many that are rarely below 1% value like Amazon and Walmart.
A $X Amazon gift card is more valuable to me than $X in cash. As in, if you gave me a choice between the two, I’d take the gift card.
I assume you mean literal cash here. I can’t imagine anyone preferring to have $20 in their Amazon wallet over $20 in their bank account
I'd take the cash. I walk past a half dozen cash machines on any given workday where I can deposit the cash in to my bank account and it'll clear and be ready to spend instantaneously.
the first thing I always did when I got a visa (or like) gift card (be it rebate, class action payment et al), was put it into amazon, as it was effectively cashing it out with close to zero friction.
Why? Just the online convenience? You can take the cash and exchange it for gift cards at a shop.
Yes, the convenience.
I have started new jobs twice once in 2023 and once last year and before my first day on the job I got a text from the CEO of the company asking me to buy gift cards for them and they couldn’t do it themselves because they were in a meeting.
They said the CEO by name and texted my number. Of course it was a scam that had nothing to do with my CEO. I wonder how they got my number?
I’ve had these, they would have got the CEO from LinkedIn and my number is googleable from having resumes online. Someone is doing this reconnaissance on different companies.
That seems like a lot of work.
LLMs are excellent at automating this work away.
I would imagine that most of the legwork is automated.
Did you confirm it was a scam? Primarily wondering if it's possible that the company itself contracted someone to do phishing test for new employees. I know there are plenty that do email version of this.
I got these around the same time frame. The funny thing is that the named CEO was for a company I'd left the year prior. I was still in touch with coworkers from that company, and they told me that it wasn't a training exercise by the infosec team. The infosec team had actually warned people about it after hearing about people getting those texts.
I would hope they don’t do that before I start using my personal number.
If someone did fall for it, the potential that your employees would spend real money that they wouldn’t get reimbursed for would definitely piss a lot of people off.
If they did it I would assume they would do it in a way that the employee would need to get some information first (e.g. the amount or type of gift card) before committing to anything. Or directing to buy it from some fake web shop.
Ceo scam is very common. Anytime someone claims to be a ceo verify! CEO is a popular target because they have power and can request weird things of employees who don't know them in normal business.
I know. That's why I wondered if some companies had started running training exercises for the phone variants. Personally I have only encountered the email ones previously.
Yeah, it happened a bunch when I was working for Yahoo… it became a running joke that our CEO was desperate for gift cards
Simon Dean did a 14 minute break down:
Is This Australia’s Most Easily Hacked Gift Card? https://www.youtube.com/watch?v=oBarXDL23hs
of how thieves were abusing gift cards by imaging them in stores, waiting until purchased and "holding" value, then extracting that value with a little bit of cracking bad security
I would not have believed for a second if stores here in my location in the U.S. did not recently begin locking up gift cards in a cage. I thought the move was quite odd, until I remembered a story that I read (possibly here?) about specific types of imaging that could see the pin behind the scratch off part.
Originally I assumed it was due to customer education/fraud, however no additional signage is posted at the stores doing this. Second thought was people must think these cards are already activated, however there is tons of text stating these things are only activated at POS.
The retailers I mentioned are nationwide. However, they've only recently began to do this, and only in a few locations that I am aware of.
https://hey.paris/posts/appleid/
This guy purchased a gift card which turned out to be dodgy, and Apple locked his entire account. So there's definitely some kind of shenanigans possible with the current supply chain.
For the past year, single chinese tourists have travelled around the country emptying stored of nearly any kind of gift card. Its some kind of money laundering scheme I think? So recently stores in affected areas started locking up gift cards, though its hard to stop as buying all gift cards isnt really illegal
>For the past year, single chinese tourists have travelled around the country emptying stored of nearly any kind of gift card.
Source?
European country, it was a fairly big news story this summer
I wonder if that's for bypassing Chinese restrictions on getting money out of the country.
And I thought I was being paranoid when I redeemed Steam gift cards before even exiting the store.
For as much as this article harps on the "AARP Lie" i.e. how gift cards can be used by "unbanked" customers on "alternate financial services platform" the first thing I advise seniors to do is AVOID those platforms because of the same exact lack of regulation problem. Paypal and Venmo might give you the run around when it comes to your money but banks don't have that kind of option.
I always felt that gift cards are the underbelly of the economy. I don’t think that’s an accident, these things are great ways to move money and pay casual labor without the red flags that cash throws up these days.
One time I got a car detailed, and when I was paying at the end, I noticed that the employee was writing out a receipt and marking that I had paid with a gift card. I don’t remember if I was paying with cash or a credit card, but either way I figure some sort of tax evasion and/or money laundering scheme was happening.
Probably skimming the till.
They return a previous customer’s transaction a refund to gift card, then take your cash and pocket it. There’s a ton of grifts like that.
This book [1] from 2011 by Kevin Poulsen about the carder Max Butler (alias Iceman). Runners would use his copied CCs (which he acquired via cracking into conputers) to buy gift cards in physical stores. Nowadays we got CVV (CVC).
[1] https://en.wikipedia.org/wiki/Kingpin_(book)
What red flags does cash throw up that are circumvented by gift cards?
Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs). I’ve also noticed (perhaps this is not recent though) the max cash limit at some ATMs reduced from $500 to $400. If you purchase $1000 or more in USPS money orders, the rep will take a copy of your government identification.
https://www.occ.treas.gov/topics/supervision-and-examination...
https://www.fincen.gov/system/files/shared/CTRPamphlet.pdf
How would gift cards circumvent this? Dollar for dollar I can only imagine a transaction getting more attention if done in gift cards, certainly one over 10k probably isn’t even possible
You buy gift cards with other purchases and pay people under the table. The gift card is cash-like for stores like Home Depot or Walmart.
You can also do stuff like get paid with someone else’s Cash App (like grandma’s) and then buy gift cards with it. If you hire “independent contractors” for casual labor or construction, many of them do that. The gift card transaction is just another CVS/Mobil purchase.
It’s not just tax evasion, sometimes they are avoiding child support or garnishments. Other times folks are just unbanked for some reason. You get blacklisted from banking you do something stupid.
It's not cash so they don't have to report it
This might be why Apple Gift cards can lock you out of iCloud [1] since they are using a 3rd party. People at Apple who are intermediaries have strict rules not to unlock due to fraud and those processes can’t be undone easily?
[1]https://hey.paris/posts/appleid/
What is the core argument why a gift card would ever be used instead of cash?
I can see if someone didn’t have any money and had a card and wanted to try and sell or exchange it, otherwise? Cash might have some limitations but none that are worse than a gift card.
Cash requires in-person exchange. To use it electronically, you’d need to participate in the formal banking sector. Many people can’t or don’t.
Instead you can take your cash to any of a large number of retailers and acquire a card that sits outside the tight credit/debit-card regulations. That card, thanks to the wide reach of various multinational corporations, has broad (and cross-border) value and is suitable for electronic exchange. All that in exchange for a small(ish) tax (the price of the card plus whatever discount the recipient/exchange applies to its face value), and less recourse if you’re scammed or you screw up somehow.
Incidentally you might be interested in @patio’s description [0] of Japanese konbini (convenience store) payments. There, your remote payee gives you a transaction number. You take that number to your local convenience store and hand them the cash to complete the otherwise-electronic transaction.
[0] https://www.bitsaboutmoney.com/archive/payments-in-japan/#:~...
In addition to other credit/debit-card regulations, gift cards generally don't support "charge backs" (as they generally don't have the infrastructure of the full credit card system and the merchant banks) so can be in some cases used as an exploit for future fraud with the receiving vendor.
> has broad (and cross-border) value
I’m wondering if this is the primary use case and that’s why I don’t really get it? I see the online aspect, but it comes with a whole other set of problems that for most cases it’s hard to imagine are easier to deal with than exchanging cash. But a way to send money across borders without any controls I can see why that might be popular. Hard to tie that back to advice the AARP should be giving though.
Cash doesn’t require in-person exchange. Western Union is cheap. I grew up with poor family, that’s how they bummed money remotely.
Some of the prevalence of gift cards in corporate culture is loopholes and silliness in tax codes and anti-bribery laws. Giving any cash to an employee counts as bonus income and needs tax withholding. Giving gift cards under certain values to an employee is a gift to the employee that doesn't count as income (and, worse, in some cases can be expense reported for a tax advantage as a cost of doing business, especially gift cards to restaurants where it may be assumed it is for a "business meal").
In a different direction, giving cash to a partner/vendor/competitor is pretty obvious to many laws as a bribe. Giving gift cards more resembles gifting swag or paying for a meal and is sometimes considered "allowed". Different companies have different views on that loophole, but some companies do take advantage of it. Enough companies at least did at one point that the "CEO is in a high-powered meeting and needs gift cards immediately" came from somewhere and it was probably that, wining and dining partners/vendors/competitors in "legally distinct from but quite resembling bribes".
Gift cards are one of the dumbest most brain-dead pieces of scam ever invented. With all kinds of restrictions that resemble "scrip" type payment systems. They only exist to increase a larger entities control over you.
Why take perfectly good cash and change it to something worse in every way? I cannot understand why so many people enthusiastically go out of their way to buy gift cards. Can you take my cash and convert it to something with the same function but with all kinds of restrictions and gotcha's? Sure no problem....
One use for them is to obfuscate my banking information. A few years ago, Sony leaked a ton of Playstation customer information. Since then, if I want to buy games from them, i buy a gift card from someone else, and then use the gift card. It adds a layer of indirection.
I can get gift cards for my groceries and fuel with a permanent 4% discount. I'm going to spend the whole amount there anyway - what wouldn't I use that path every time?
Paranoia of the war on drugs is part of it as well. Some are afraid that kids with large sums of cash would spend it on drugs or alcohol and it is more difficult to barter giftcards for drugs.
Not a good reason but it is a real one I have heard.
> It surprises many people to learn that the United States aggressively defends customers from fraud over some payment methods
I feel like that needs a "(currently but not for much longer)" caveat[0] to avoid being wildly disingenuous.
[0] https://www.politico.com/news/2025/11/11/trump-administratio... - "the CFPB [...] anticipates exhausting its currently available funds in early 2026.”
Oof. Of course Patrick is right that paying by gift card isn't always a scam, but I think less-technically-savvy people are better off just believing that it is. And hell, as a technically-savvy person, I will just believe that it is as well, because it's less effort to do so, and won't hurt me to believe that. If someone wants you to pay for something by gift card, find the same or a similar product somewhere else, where they'll take credit/debit cards, checks, cash, whatever is actually legal tender and is appropriate for the situation.
But from Patrick's description, it feels like the situations where it's (usually) not a scam are instances where paying by gift card is an option, not something the "seller" is pushing you hard to do, or even requiring you to do. That seems... okay? I personally would still pay with a credit card, but mayyyybe it's ok for someone who can't get a credit card to go the gift card route. But I would still be wary.
If you're dealing with an unbanked business that cannot take credit/debit cards or checks due to the legal climate around their business or product, then you probably already know what you're getting yourself into. (But still, bit of a red flag if they don't accept cash or even cryptocurrencies, as much as I find those scammy as well.)
> The people of the United States, through their elected representatives and the civil servants who labor on their behalf, intentionally exempt gift cards from the Reg E regime in the interest of facilitating commerce.
This sort of phrasing about things kinda annoys me. Yes, "through their elected representatives...", technically true, but "the people of the United States", no, not really so much. I'm sure most people don't even know about these sorts of differences, and I'm sure the majority of people who are in favor of these sorts of protections on credit/debit cards would want them to apply to gift cards as well.
The problem with this sort of phrasing implies that the American people actively chose this, or even had any choice in the matter. We are limited in the political options that are put before us; we don't get a big menu of policy positions, check off the ones we like, and then a politician appears that matches all our preferences. Some people might -- very reasonably! -- prioritize other policy positions over gift card protection regulation, even if they want the latter as well.
It comes down to who initiates it.
I've got some gift cards sitting here--her health insurance has rewards for doing certain things, there's no way to get them as cash but you can buy gift cards for certain stores. Nothing scammy about it but I'm annoyed Amazon isn't an option because simply dumping them into my Amazon account would be the easiest solution.
> . Paysafe, for example, is a publicly traded company with thousands of employees, the constellation of regulatory supervision you’d expect, and a subsidiary Openbucks which is designed to give businesses the ability to embed Pay Us With A Cash Voucher in their websites/invoices/telephone collection workflows.
Fascinating footnote.
I thought so as well. It also confuses me the more I think about it… it seems like they have all of the things a normal bank has, so why isn’t it just a bank? What is preventing them from just offering a bank account to people who are traditionally unbanked?
> very likely made it impossible for anyone at BigCo to reconstruct what happened to a particular gift card between checkout and most recent use.
Could I improve my own privacy posture by just buying myself gift cards, if I can't use cash? Or that's just pushing all the data that the store would get onto the gift card company?
Just out of curiosity, what happens when you buy a gift card for Toys R Us or Red Lobster or K-Mart, and then the company goes out of business?
A date is given and then after that, the gift cards are worthless.
A ton of studies colleges/universities/corporations do on blind people give gift cards as payment. Usually $20 or so for a good 40 minutes of time.
> The American Association of Retired People (AARP, an advocacy non-profit for older adults) has paid for ads on podcasts I listen to. The ad made a claim which felt raspberry-worthy (in service of an important public service announcement), which they repeat in writing: Asking to be paid by gift card is always a scam.
>Of course it isn’t. Gift cards are a payments rail, and an enormous business independently of being a payments rail. Hundreds of firms will indeed ask you to pay them on gift cards!
That’s where I stopped reading. The author seems more interested in being contrarian for clicks than in giving practical advice. AARP is right here: being asked to pay by gift card is a major red flag, and unless you know the company personally, it’s time to walk away.
Patrick very carefully declined to give examples of such legitimate yet debanked businesses. Presumably because they're all grey market stuff that sets off a whole other "wait, is that legal?" conversation.
I have never seen a legitimate business asking for payment in gift cards. I've encountered the traditional tradesmen offering discounts for cash, though.
Edit: I think he may actually be talking about businesses accepting payments in their own gift cards, which is so obvious that it's easy to forget. It's not a scam when Apple ask you to pay in Apple gift cards. It's just the only non scam such case.
Apple don't ask you to pay in Apple gift cards. They give you the option, but they are perfectly happy with a credit card.
If “Apple” asks you to pay with Apple gift cards, they’re not Apple, and it is most definitely a scam.
I don’t think he is talking about businesses that accept payment in other gift cards… he has a footnote explaining the type of business he is talking about.
I've used 3rd party retail gift cards to pay for consumer VPN service, which is only "grey market" because privacy is often criminalized. But I still 100% agree with what the AARP is saying. This is one of those things that sure, there is technically an exception, but by the time you get to the level of knowing enough to know when that exception applies, you end up agreeing with the common advice.
I’m the kind of nerd who enjoys the surprising nitty gritty details, so I enjoyed the rest of the article and I’d recommend people read it.
But I agree with you: the AARP is 100% right to be running PSAs like this. I’d be curious to hear more about how a shadow economy like this would/would not help unbanked people, which he implies but did not describe at all. But it certainly doesn’t change the point that gift cards are an effective vehicle for fraud, and anytime someone asks to pay you (or especially you to pay them) in gift cards… your scam senses should tingle.
Agreed. It's more practical to tell seniors that all gift card requests are scams rather than teaching them to identify warning signs, since legitimate gift card payments are so rare.
The world is full of people who, like you, seek any reason to not listen or read interesting things in favour of doing just about anything else. You don’t win a prize for being part of that group — at best, you saved as much time as it took you to write that comment. In exchange you are likely poorer for it intellectually because Patrick’s writing has an exceptionally high signal to noise ratio, and that signal is one most are not privy to.
At no point did the article claim AARP was in the wrong for running those ads. But had you kept reading you’d maybe have understood that wasn’t the point nor the premise in the first place.
I'm ok with you being superior to me in every way possible; I think I can live with that.
In case it wasn't clear: I don't care what you do, I care that other people don't miss out on a good article because you flaunt your anti-intellectualism on HN.
The author is an expert in the field of payments. What you call "being contrarian" is better called "speaking the truth".
I would call it "splitting hairs," which experts tend to do.
The practical reality is acknowledged at the end of the post.
Even if, technically speaking, using gift cards as a payments instrument is not a scam 100% of the time, anyone but a non-expert should behave as if it's 100%.
I am also an expert in the field of payments. The only thing that makes gift cards stand out from other transaction media is there are many fewer guardrails around them money movement wise.
I'd pretty much back up AARP on this one. Asking for payment by gift card should in the majority of cases put one on guard.
The article wasn’t about the AARP. That was just the hook. The article is about what you just said: there are many fewer guardrails, and why.
Author works in payments industry which issues and accepts gift cards, benefits from the lack of consumer protections, and incidentally doesn’t make any revenue on cash payments.
Is he an expert in the field of old people being scammed out of lots of money? Telling non tech-savvy people that it's ok to listen to the nice man on the phone and send him a lot of gift cards?
Who do you think the article's readers are? Random people? No, it's explicitly for people who are interested in both tech and finance.
Yes the whole essay was premised on this dumb little sleight of hand. It’s disingenuous.
AARP isn’t telling fibs. It’s giving sound advice.
The only legit use of a gift card is when you’re redeeming that gift card directly with the issuer. No business is going to request or require that you do that.
gift cards are one of those odd legal things with contraband-grade hazards, not worth it, I abstain
I am going to disagree with patio11 here. If someone asks you to pay with gift cards, its a scam.
Gift cards are the equivalent of buying dollars at 105 cents, but its not a scam, since everybody is upfront about the transaction.
America needs a Great Firewall for border security. Almost all scams and spam originate outside our country, and are out of the reach of our law enforcement.
We don't let terrorists and robbers wander in, why do allow the digital equivalent?