An often overlooked positive feature of an open-loop gift card is that it has limited funds, and when used for online, or even offline, purchases, limits your exposure to fraud or other undesirable consequences.

One very common such undesirable consequence are free trial subscriptions that convert into a recurring paid billing after the free trial period, typically 30 days.  We often forget to cancel the subscription before the first billing happens, and companies know this, which is why they structure trial offers this way.

For instance, I recently tried out GoToMyPC, which offered a 30 day free trial, but required me to enter a credit card number for monthly billing after the 30 day trial period.  By using a gift card with a balance sufficient to pass their authorization (one months billing) and then spending the balance on the card, I’ve insured that I won’t be billed excessively for something I just wanted to try out.  Even if I forget to spend the balance on the card in time, I’ve limited my loss potential to the balance on the gift card.

By design, it is impossible to tell a gift card from a credit card, so as long as your gift card passes authorization (a process which we will discuss in an upcoming series on using gift cards for online and offline purchases), the company has no way of knowing that you are protecting yourself with a limited funds card.