The Consumer Federation of America has put out a gift card advocacy brochure to help consumers better understand gift cards.
Archive for the ‘Tips’ Category
GiftCards.com has jumped on the no-fee band wagon and now offers Visa gift cards with no expiration or maintenance fees. As far as I can tell, this applies to all the fees they previously had, including the monthly administrative fees, fee to close an account, fee to replace a lost or stolen card, balance inquiry fee, etc.
Several days ago I posted on an extraordinary customer service experience that one AMEX gift card customer had. Well, today I am seriously feeling the love for AMEX gift cards: They have done away with the monthly fee, effective immediately, for new cards and all existing cards. AMEX fees were already low by open-loop gift cards standards, at $2/month starting 12 months from when the gift card was issued.
What makes this even more significant of a move is that this goes above and beyond what AMEX would have had to comply with as part of the new gift cards laws in the Credit Card Reform Act of 2009, which says gift cards may not expire (AMEX cards already didn’t expire) and vendors may not charge fees for the first 12 months.
AMEX gift cards still carry an up-front purchase fee and may be hard to spend the last few bucks on, but this move makes them the clear leader in value if you are going to buy an open-loop gift cards.
This is interesting. Here is an article that completely hammers what they call “rebate cards.” The claim is that companies make rebates incredibly hard to get and by issuing rebate cards instead of checks, they make them hard to spend too. They are so bad in fact that the Canadian government calls them deceptive and has outlawed issuing rebates in cards; rebates in Canada must be sent by check.
Why are Canada, the FTC, Attorneys General, Offices of Consumer Affairs and others so down on rebate cards?
1. You can’t check the balance except by going to a particular website.
2. You can’t tell how much is left at the point of sale.
3. It is very difficult to use the card as well as another form of payment for a single purchase
4. It is nearly impossibly to spend all the money on the card.
5. The cards additionally carry onerous fees.
6. The terms of the card were not fully disclosed at the time of issue.
Does any of that sound familiar? Rebate cards it turns out are nothing more than open-loop (Visa etc.) preloaded gift/debit cards.
Why is it that when these cards are issued as rebates everyone is hopping mad, and yet when they are called gift cards, people are running out to buy them? Open-loop gift cards have been the fastest growing segment of the gift card market for several years.
It is an interesting piece of consumer psychology to understand why losing money on a rebate card gets people fuming and yet the many billions more that are lost every year on open-loop gift cards harly raises an eyebrow. Perhaps understanding why people react differently to these two scenarios will help us understand how to get people outraged at the almost smash-and-grab tactics of the gift card issuers that causes consumers to lose so much money every year. Then we might see some meaningful legislation to fix this problem.
Virtual gift cards aren’t new, but this article in the Portland Press is very excited about a new virtual gift card offering by a local company.
Bottom line: Virtual gift cards are a bad idea. If you think it is hard to remember to spend a gift card when you have it in your wallet, try remembering to spend them when they are sitting in an email on your computer.
I personally think open-loop gift cards are a scam plain and simple. Yet, if you must choose an open-loop gift card, this experience might make you want to (a) always be persistent to get what you are owed and (b) choose AMEX over other the other branded open-loop gift cards.
In short, the customer took his $50 AMEX gift card to a store and was unable to use it. He called AMEX customer service on the spot and a half hour on the phone resulted in little help and somewhat of a rude experience. So he wrote a letter to AMEX and they fixed the problem, said they would handle the bad customer service rep internally, and gave him reward points worth another $50 gift card. Kudos to the customer for demanding what he was entitled to and AMEX for stepping up to the plate.
As for the other cards, Visa and Mastercard cards are service by many different banks and they all have horrible customer service sites and for some of them it is impossible to get an actual person on the phone. Discover, like AMEX manages its cards directly, but is generally less universally accepted than AMEX. So, if I had to choose an open-loop gift card, I’d probably choose AMEX.
Here is a nice little tutorial on how to use an open-loop (Visa/MasterCard/Amex/Discover) gift card with PayPal.
Apparently, Starbucks has not been abiding by the provisions of California’s gift card law in effect since January 2008; they haven’t been redeeming balances below $10 on gift cards for cash on request. However, they now claim that they are taking steps to train staff appropriately and add a redemption button to their cash registers to make the process easier.
Just a subtle reminder, if you live in California, or your state has a law that requires retailers to redeem small gift card balances in cash, stand up for your rights! (story)
I’ve paid enough attention to know that, while open-loop gift cards (Visa, MasterCard, etc.) may be a rip off, you shouldn’t be too concerned about the cards being hacked, which is actually a big problem with store-specific gift cards. With close-loop/store specific cards, hackers often scan the cards in-store to get the numbers, wait for them to be activated, and then create a phony card with the just activated information to drain the cards value (i.e. purchase things) before the customer knows anything is wrong. Because open-loop cards are so well packaged, they aren’t prone to this type of hacking.
However, as a merchant, I would be VERY worried about accepting open-loop cards. Hardly a week goes by without one or two stories about scams involving gift cards that are hacked to contain stolen credit card information. Thieves then use then use them as gift cards while the charges come from a stolen credit card. It is not too hard to imagine that the stories in the news represent just a fraction of the cases of this kind of fraud.
Often times, banks and credit card processors hold merchants responsible for any fraud that passes through their credit card machines, which can be a huge liability.
From experience, I know that it is incredibly hard to distinguish between gift cards and credit cards just from the card numbers. If Visa and MasterCard and the likes have a way to tell the difference between gift cards and credit cards, they aren’t giving merchants the benefit of this information. I suspect the only way to tell is through the merchant network, meaning that the issuing banks database can identify which numbers represent gift cards and which represent credit cards. The current merchant processing interfaces do not include any information which might help. It is quite possible that providing such information might not be possible without redesigning the merchant processing system, which might break much of the existing hardware and software.
There have been major class-action lawsuits by merchants against the card networks for making merchants swallow the fraud. As gift card/credit card fraud becomes more prevalent, the Visas and MasterCards of the world may be forced to address this by altering their systems to distinguish between gift cards and credit cards, lest they be forced to swallow the fraud themselves.
Update 8/26/09: If you are a merchant, you can protect yourself against this kind of fraud by checking the last 4 digits on the card against those printed on the receipt. If they don’t match up, you’ve got an altered gift card.
This blog post in the Baltimore Sun is a great example of a concerned consumer researching the law related to gift cards in their state, verifying the law with the relevant authorities, and then contacting the issuer of the gift certificate to educate them on the law and make sure their gift certificate was treated as it should be.
The point is, don’t just roll over if you think you are being treated unfairly or what a business is doing is against the law. Stand up for your rights! If everyone demanded compliance with gift card laws, issuers would have no choice but to comply.
GiftCardsAgain.com has launched a companion site GiftCardDonor.com that you can use to donate gift cards to one of their (limited) listed charities. They sell the card on GiftCardAgain.com and donate 75% of the proceeds to the charity. A better option might be simply to mail the cards to a charity of your choice with a nice card telling them how much you appreciate what they are doing.
As a Mac owner, I’ve found Apple to be not very forthcoming when there are problems and unreasonable at times with their policies. This seems to be the tact there are taking with fraudulent iTunes gift cards, whether they were generated by people who hacked the algorithm or bought with stolen credit cards. If you use such a gift card on your iTunes account, you risk Apple closing your account and losing access to all your purchased music. The best idea is to stay away from iTunes gift cards on the secondary market. (article)
It isn’t clear exactly what the cash-in rates or for gift cards but Swapagift.com (part of GiftCards.com) has 600 partner locations where you can bring your gift cards and get cash on the spot. They take many open and closed loop gift cards. (story)
I came across this handy summary of prepaid debit and gift cards. The author makes a very valid point; even when you’ve managed to spend the last dime on your prepaid card, you may not want to get rid of it. In the case where you return something that was purchased using your prepaid card, it will likely go back on the card. If you don’t have the card, your money is lost.
In most cases gift cards should not be thought of as cash – they tend to lose value quickly, and you often can’t spend the last few bucks on your card. However, there is one case where you should think of them as cash – when you send them through the mail. Every week I see stories about Postal employees being busted for stealing gift cards from the mail. If you do want to send gift cards through the Postal mail, don’t make them look like gift cards.
I’ve always liked the idea of the Coinstar machines where you an dump all of your change and get cash; much more productive than counting and rolling it all yourself. But I never wanted to pay the 15% commission for the service. Well now Coinstar will waive the fee if you take your money on a name brand gift card (Amazon.com, Starbucks, etc.) instead of cash. One of the biggest problems with gift cards and the reason why the industry is so profitable, is breakage, where consumers don’t use up all the value on their gift cards. But, if you can choose a gift card that you know you will use, then I think it is a great idea.
Perhaps someone will take this idea a step further and sell a gift card that the recipient can use online to pick out a gift card of their choice from a wide range of retailers. I might actually consider giving someone a gift card if that happened.
Some people like open-loop (Visa) gift cards because it affords them some privacy; the gift card is anonymous in that it is not associated with your name. Even if you are not a criminal, it can be disturbing to think how much information is collected about all of your spending habits, such as when you use normal credit cards. Thanks to the Gramm-Leach-Bliley Financial Services Modernization Act of 1999, this information is often sold in some form by financial institutions if you fail to properly opt-out (and even sometimes if you do properly opt-out).
It is true, as this article explains, that gift cards can be tracked just like credit cards. Authorities can obtain records that show where the gift cards were used and for what. But unless you use them in some way that associates the cards to you, such as purchasing something online which is then shipped to your name and address, purchases are still anonymous.
GiftCardRescue.com has launched a site GiftCardBalance.com that lists the contact information (URL’s and phone numbers) for quite a few gift cards. It is a convenient place to find the balance check information. Or, you could just look on the back of your card for the same information, seeing as you are going to need your card to actually check the balance.
A site where you could actually enter any gift card number and select the issuer to check the balance would be more helpful.
Update 5/19/10: Something is funky with the GiftCardBalance.com site and it appears that it may no longer be trustworthy, especially in light of recent scams involving fake gift card balance sites.
I’ll admit it, I don’t get excited about gift card deals very often, but Restaurant.com does have some smoking deals on gift cards. You can normally buy a $25 gift card for $10, but until February 28th, they are selling all gift cards for 80% off. That’s just $2 for a $25 gift card. Perfect if you have an upcoming dinner at a restaurant, or there is one that you frequent. Enter the code DINE when you check out. (article)
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