Gift Cards Info & Advices

gift-cards-img A gift card is a restricted monetary card issued by retailers or banks to be used as an alternative to a gift. In other words, it is a stored-value general-use credit card or private label retail card that can be given as a gift.

Gift Card Overview

Size

A gift card may resemble a credit card or display a specific theme on a plastic card the size of a normal bank card.

Identification

The card is identified by a specific number or code, not usually with an individual name, and thus could be used by anybody.

Authorization

They are backed by an on-line electronic system for authorization. Some gift cards can be reloaded by payment and can be used thus multiple times.

Cards may have a barcode or magnetic strip, which is read by an electronic credit card machine.

Value

Many cards have no value until they are sold, at which time the cashier enters the amount which the customer wishes to put on the card. This amount is rarely stored on the card but is instead noted in the store's database, which is crosslinked to the card ID.

Gift cards thus are generally not stored-value cards as used in many public transport systems or library photocopiers, where a simplified system (with no network) stores the value only on the card itself.

Security

To thwart counterfeiting, the data are encrypted. The magnetic strip is also often placed differently than on credit cards, so they cannot be read or written with standard equipment. Other gift cards may have a set value and need to be activated by calling a specific number.

Types of Gift Cards

Gift cards are divided into "open loop" and "closed loop" cards.

Open loop cards

Open loop cards are issued by banks or credit card companies and can be redeemed by different establishments.

Closed loop cards

Closed loop cards are issued by a specific store or restaurant and can be only redeemed by the issuing provider. However, they tend to have lesser problems with card value decay and fees.

In either case the giver would buy the gift card (and may have to pay an additional purchase fee), and the recipient of the card would use the value of the card at a later transaction.

Hybrid closed loop card

A third form is the "hybrid closed loop" card where the issuer has bundled a number of closed loop cards; an example is a gift card for a specific mall.

Other notes

Gift cards differ from gift certificates. Gift certificates are usually sold as a paper document with an authorized signature by a restaurant, store, or other individual establishment as a voucher for a future service; there is no electronic authorization.

Gift card does not include fuel cards. Bank-issued gift cards may be used in lieu of checks as a way to disburse rebate funds.

Redemption rate

Not all gift cards are redeemed, for many reasons. Common reasons include:

loss of the card,
time decay,
personal disinterest in the store that the card is accepted,
complex rules of redemption, and
the attempt of the recipient to save money for the giver.

It has been estimated that perhaps 10% of cards are not redeemed, amounting to a gain for retailers of about $8 billion in the US in 2006

Regulations

Canada

Canada has regulations for gift card. In the Province of Manitoba, Ontario and British Columbia, legislation has been passed to ban expiry dates and fees collected on gift cards.

United States

In the United States uniform standards about gift cards do not exist.

Open loop cards are governed by rules of the Comptroller of the Currency, however oversight has been criticized.

Closed loop gift cards are subject to rules set by different state regulations, and issuing authorities vary widely in the rules they set for the consumer.

The problem is that rules can be changed by the issuer without notifying the consumer

Resources

Check out those resources for Gift Card.