PaymentsJournal
No Result
View All Result
SIGN UP
  • Commercial
  • Credit
  • Debit
  • Digital Assets & Crypto
  • Digital Banking
  • Emerging Payments
  • Fraud & Security
  • Merchant
  • Prepaid
PaymentsJournal
  • Commercial
  • Credit
  • Debit
  • Digital Assets & Crypto
  • Digital Banking
  • Emerging Payments
  • Fraud & Security
  • Merchant
  • Prepaid
No Result
View All Result
PaymentsJournal
No Result
View All Result

Can Maryland’s New Law Stop Gift Card Draining?

By Tom Nawrocki
July 29, 2024
in Analysts Coverage, Prepaid
0
0
SHARES
0
VIEWS
Share on LinkedIn
Travel Gift Cards, gift card

The Market for Travel Gift Cards Heats Up

Maryland has become the first state to pass a law combatting gift card draining, mandating tamper-proof packaging for most gift cards sold in person. The intent is to curb the growing problem of buying prepaid cards only to find their balances have been emptied.

Card draining involves thieves removing gift cards from stores, taking their numeric codes, and putting the products back on display. When a genuine customer later loads money onto a tampered card, criminals can access it online and steal the balance.

Card draining grew sharply during the pandemic, thanks to the ingenuity of Chinese organized crime rings. Big box retailers operated with little traffic or supervision during the COVID-19 lockdowns, leaving hundreds of gift cards available to the public on their racks. According to an investigation by ProPublica, criminals learned to remove and replace the security stickers and packaging that conceal the card’s codes.

Open-loop gift cards, such as those issued by Visa, Mastercard, or American Express, are particularly popular with draining gangs. These cards can be redeemed at any business that accepts debit payments, as opposed to closed-loop cards that can be spent only at a single business.

An Expensive Problem

The Maryland law, which passed in May and will go into effect in June 2025, faced strong opposition from retailers. Lobbyists from Walmart, Target, and Home Depot argued that changing their card packaging to comply with the new rule would be very costly to design and manufacture.

However, the problem is also very costly for consumers. ProPublica cited research from Javelin Strategy & Research, which estimated that $570 billion is loaded onto gift and prepaid cards each year in the United States. A 2022 AARP study found that a quarter of U.S. respondents had been given or received a card with no balance, presumably because it had been tampered with.

At the same time, Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, is not so sure the Maryland law will have a significant impact. “I think it will have limited effect,” he told PaymentsJournal. “It’s limited in scope to not just one state, but a state where a large percent of the population can and does live and work in a multi-jurisdiction geography.

“The problems are known, and the industry is working to improve packaging and processes,” he said. “To be truly effective I believe there needs to be more of a partnership between regulators and the industry to agree on parameters that eliminate state-by-state regulations.”

0
SHARES
0
VIEWS
Share on LinkedIn
Tags: Closed-LoopCovid-19Gift CardGift Card DrainingOpen LoopPrepaid

    Get the Latest News and Insights Delivered Daily

    Subscribe to the PaymentsJournal Newsletter for exclusive insight and data from Javelin Strategy & Research analysts and industry professionals.

    Must Reads

    credit union small business banking

    How Credit Unions Can Win Over Small Businesses

    October 28, 2026
    global stablecoin adoption

    A Global View: Why Stablecoins Look Different in Every Market

    October 27, 2026
    stripe stablecoin

    Stablecoins and the Threat to Traditional Bank Deposits

    October 26, 2026
    global cross-border payment infrastructure

    A New Payment Rail Is Not a Global Payment Solution

    October 23, 2026
    stablecoins in banking

    As Stablecoins Mature, Financial Institutions Face a Crossroads

    October 22, 2026

    Automation to Accountability: Governing AI in Fraud and Disputes 

    October 21, 2026
    google solana agentic

    Agentic Commerce Is Still Hype Ahead of Reality

    October 20, 2026
    Customer, shopping and credit card for florist shop payment with POS machine or phone for sale of flowers at small business. Hands of woman paying with rfid technology for service at retail store.

    As Rewards Programs Face Pressure, Card-Linked Offers Gain Ground

    October 19, 2026

    Linkedin-in X-twitter
    • Commercial
    • Credit
    • Debit
    • Digital Assets & Crypto
    • Digital Banking
    • Commercial
    • Credit
    • Debit
    • Digital Assets & Crypto
    • Digital Banking
    • Emerging Payments
    • Fraud & Security
    • Merchant
    • Prepaid
    • Emerging Payments
    • Fraud & Security
    • Merchant
    • Prepaid
    • About Us
    • Advertise With Us
    • Sign Up for Our Newsletter
    • About Us
    • Advertise With Us
    • Sign Up for Our Newsletter

    ©2026 PaymentsJournal.com |  Terms of Use | Privacy Policy

    • Commercial Payments
    • Credit
    • Debit
    • Digital Assets & Crypto
    • Emerging Payments
    • Fraud & Security
    • Merchant
    • Prepaid
    No Result
    View All Result