A gift card can be a perfect gift in a pinch, or an easy way to prepare for a shopping spree at your favorite retailer. However, for dozens of Costco customers that purchased Shop gift cards from the retailer, they might be rethinking their decision.
According to CBC News, dozens of Costco customers have reported that Shop cards they recently purchased mysteriously had no funds even though they never used them. The news outlet found that while a few customers have gotten a refund, some are still fighting for their hard-earned cash.
Five customers were interviewed for the report, with some losing up to $1,000 due to this scam.
One of these customers, Ontario resident Shelly Xu, checked her balance one day to find her $200 gift card had been emptied entirely. She’s spent hours fighting for a resolution but nothing has come to fruition yet.
What Costco is saying about the issue
Costco has declined CBC’s multiple requests for comment, but the retailer’s communication with affected clients suggests that bad actors may be to blame. In an identical letter sent to three different customers, the retailer noted that an, “ongoing investigation indicates that a limited number of digital Shop cards may have been used by unauthorized individuals,” the letter stated.
The retailer also suggested that fraudsters may have gotten access to the customers emails to drain their cards. But, the customers aren’t convinced. Experts aren’t happy with Costco’s response either.
"From a business perspective, this is a real marketing fail because you’re going to have customers lose trust in the brand," professor and consumer advocate Daniel Tsai told CBC.
"The proper thing for Costco to do right now is to admit there’s a problem and not let this fester."
How gift card draining works
Gift card fraud is a profitable business for scammers. According to the Retail Council of Canada, gift card fraud led to $3.8 million in losses for Canadians in 2021. So, what’s under the hood of such a lucrative theft method?
Print retailer Taylor notes that the process for gift card scams is largely straightforward. A criminal usually takes a new card from the store and opens the packaging to reveal the card number, then hides evidence of tampering. The fraudster then monitors the card online using the recently acquired information and waits until the card is activated. Once activated, they quickly use any available funds for their own means.
Tech giant Telus also notes that gift card draining can be a result of large-scale data breaches, meaning thieves can steal gift card data in large quantities.
Telus also recommends you reach out to your retailer as soon as you realize your funds have been illegally taken. If you were gifted the card, let that person know as well. As with any types of fraud, ensure you report it to the Canadian Anti-Fraud Centre (CAFC) so they can record the issue and help other consumers be aware.
What you can do to protect your gift card balance
Thankfully, gift card fraud is a theft that can be caught before you purchase the card, or at least mitigated. Here are some tips from experts to help you protect your next gift card until you decide to use it.
- Use the funds promptly: The longer a card sits, the higher the risk it is used by an unauthorized source. Using the funds quickly mitigates that risk.
- Check for signs of tampering: Look over a gift card’s packaging closely before activating it. If it has any signs of tampering or odd openings, don’t use it and alert the retailer.
- Opt for digital options: Digital (or e-gift cards) can be more secure than physical gift cards as they cannot be tampered with.
Though fraud does happen, gift cards are still a reliable purchase — if you use them properly. Make sure to do your due diligence before and after a gift card purchase so you keep the funds in your wallet where they belong.
Sources
1. CBC News: Costco customers shocked after someone drains all the funds from their gift cards, by Sophia Harris (Aug 7, 2025)
2. Retail Council of Canada: Gift Card Fraud
3. Telus: The gift that didn’t give: navigating unexpected gift card draining, by Amanda Lee (Jan 6, 2025)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.