Gift Card Selling Machine Faulty Glitch Fraud

You have probably used a gift card kiosk at your local grocery store, pharmacy, or big-box retailer. You pick a card from a rack, take it to the register, and pay. But in recent years, a growing number of retailers have installed automated gift card selling machines—often placed near self-checkout lanes—that let you buy a card by scanning it at a terminal and paying with cash or a credit card. These machines are supposed to be convenient. Instead, for thousands of middle-class Americans, they have become a source of frustration, lost money, and outright fraud.

The scam is simple, and it is deeply offline. You select a gift card from the machine’s display, complete the purchase, and walk away believing you have a valid card. Days or weeks later, when you try to use it, the balance is zero—or the card is flagged as tampered. The problem is not that the cards were stolen after you bought them. The problem is that the machine itself had a fault, a glitch, or was deliberately manipulated before you ever touched the card. This is not a digital hack. It is a physical, in-store ripoff that preys on the trust you put in automated retail.

How does it happen? In many cases, fraudsters tamper with the gift card selling machines themselves. They might pry open a display or use a small tool to extract cards from a stack without paying. More commonly, they use a technique called “card draining.” They take a legitimate, unactivated gift card from the machine, carefully open the packaging, record the card number and PIN (the code on the back), and then reseal the package with glue or tape. The card is placed back inside the machine. When you buy that card and the clerk or the terminal activates it, the scammer—who has the number and PIN—can immediately check the balance online or by phone and drain the funds before you even leave the parking lot. By the time you use the card, it is worthless.

But what if the machine itself is faulty? Some retailers have reported that their gift card selling machines occasionally double-charge customers, fail to activate cards correctly, or give out cards that were already pre-scanned by thieves. In one well-documented case, a chain of grocery stores discovered that a software glitch in their kiosks caused every fifth card sold to have a zero balance at activation. Customers who bought those cards received a receipt, but the money never loaded onto the card. The store initially blamed the card issuer, then the machine manufacturer, then the customers. Those who complained were told the problem was “user error” or “a temporary network issue.” They were out the money, often $50 to $200 at a time.

This is not a small problem. According to the Federal Trade Commission, gift card fraud—including tampering at kiosks and faulty machine activations—cost consumers more than $228 million in 2023 alone. Many victims are middle-class Americans aged 45 to 64, precisely the demographic that trusts retail machines and is less likely to question a receipt that looks fine at first glance. You are not being hacked on your phone. You are being ripped off in a store where you shop every week.

How can you spot this offline scam? First, never buy a gift card that is displayed in an open, easy-to-access rack near a self-service machine. Look for cards that are kept behind a counter or in a locked display. If you must buy from a kiosk, inspect the packaging carefully before purchasing. Look for torn edges, loose seals, or any sign that the card has been removed and reinserted. Second, check the card’s security code on the back. Some tamperers will place a sticker with a fake code over the original. If the code looks off-center or has a different font, do not buy it. Third, buy gift cards directly from the store’s customer service desk, not from a standalone machine. A human cashier can verify that the card is being activated in real time.

Finally, if you do buy a card from a machine, use it as soon as possible. Do not let it sit in your wallet or glove compartment for weeks. The scammer is waiting. Once they drain the card, there is almost no way to get your money back. Retailers will often say they are not responsible because the card was “activated properly at the point of sale.” The card issuer—often a third party like InComm or Blackhawk—will claim the transaction was valid. You are left with a paper receipt and an empty card.

At Unreputable, we track these offline consumer ripoffs because they are designed to look normal. The machine is clean. The receipt prints. The card feels real. But the glitch or the fraud is already baked into the system. Protect yourself by being skeptical of any gift card machine that is not directly supervised by store staff. And remember: if a deal, a promotional bonus, or a convenience item requires you to buy a gift card from an automated terminal, pause. It might be the most expensive “convenience” you ever pay for.