What Is a Gift Card?

A gift card, also known as a gift voucher, is a prepaid stored-value money card, typically issued by a retailer or bank. It can be used as an alternative to cash for purchases within a particular store or related businesses. Gift cards are designed to be used only until the original amount is gone. If you make a purchase that’s less than the balance on the card, the remaining amount stays on the card for future use.

Key Takeaways

• Gift cards, also known as gift vouchers, are prepaid stored-value money cards issued by a retailer or a bank. They can be used as alternatives to cash for purchases within physical and/or online stores.
• Voucher cards come in two main types: physical cards and digital cards, often referred to as e-gift cards.
• Store-specific gift vouchers are used at particular merchants, while general-use prepaid cards can be used almost anywhere credit cards are accepted.
• Customers need to be aware of potential fraud when dealing with gift cards. It’s advised to purchase from reputable sources and understand the terms and conditions.
• While gift cards work somewhat like credit or debit cards, most gift cards these days do not come with a PIN and cannot be reloaded.
• There are different types of gift cards, including retail cards, restaurant cards, bank or credit card-issued gift vouchers, gas station cards, entertainment cards, grocery store cards, and charitable cards.

Gift Cards Explained

A gift card is a prepaid payment card issued by a retailer or bank, designed as a convenient alternative to cash for purchases within specific stores or a network of related businesses. These cards contain a set amount of money that the cardholder can use to buy goods or services.

Store-specific gift cards are intended for use at particular merchants. General-use prepaid cards offer greater flexibility and can be used almost anywhere credit cards are accepted, including online retailers and physical shops. Some gift vouchers can even be reloaded with additional funds and reused.

Security Challenges

Due to their monetary value and ease of transfer, gift cards have become a common medium for transactions and, consequently, a target for scams. Because of that, security measures and awareness are important aspects for both purchasers and recipients of gift vouchers.

Security Best Practices

Measures for fraud prevention and loss & theft protection are integral to ensuring that gift cards remain a safe and reliable form of payment. To mitigate the risks of fraudulent activities, customers should:

• Register the gift card with the issuer (if possible) to monitor transactions.
• Avoid sharing card details such as the PIN, unless using it for an intended purchase.
• Purchase from reputable sources to minimize the risk of buying tampered or counterfeit cards.
• Scrutinize communication that demands payment via gift cards, as it is a common tactic used by scammers.

To protect against loss or theft of gift vouchers, shoppers should:

• Treat gift cards like cash by keeping them in a secure place.
• Report lost or stolen cards immediately to the issuer to see if funds can be frozen or transferred.
• Keep the original purchase receipt, which may be required to show proof of purchase or to report the card lost or stolen.

Issuer Obligations

Issuers of gift cards must adhere to distinct requirements:

• Disclosure of Terms and Conditions: an issuer must clearly disclose the terms and conditions to the buyer at the time of purchase.
• Fees and expiry dates: according to the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, gift vouchers cannot expire within five years from the date they were activated. Also, fees can generally only be charged after one year of inactivity. However, there can still be fees for activities like replacing a lost or stolen card.
• Form compliance: cards must conform to Section 1005.20 of the non-card forms like codes or devices used for transactions as detailed by the Consumer Finacial Protection Bureau.
• Exclusion adherence: certain exclusions apply, such as products not being allowed to be marketed as gift cards or certificates.
• Marketing guidelines: issuers must practice clear labeling to avoid misleading consumers.
• Record of transactions: gift voucher issuers must maintain accurate transaction histories.
• Unredeemed gift cards: issuers must follow specific state laws regarding unredeemed gift cards. Some states treat unused cards as abandoned property and require companies to turn over the dormant card balances to the state after a while.
• Replacement of lost or stolen cards: not all card issuers replace lost or stolen cards. If they do, they are obliged to provide a replacement or the remaining card balance as long as the card is registered and proof of purchase can be provided.

How Does a Gift Card Work?

Gift cards work much like credit or debit cards in terms of their use. They include a magnetic strip that is swiped at the cash register during a transaction and a barcode that must be scanned. Plenty of gift cards these days come without a PIN and cannot be reloaded.

E-gift cards work a little differently. They are delivered to recipients via email, SMS, or a specific app. To use the gift card, you would simply provide the e-gift card number at the point of purchase, including online checkout.

• Purchase and activation: cards can be purchased online or in stores. The cashier at the point of sale activates the card at the time of purchase by loading it with the amount you’ve chosen. For online purchases, activation happens electronically after payment.
• Using the gift card: for physical ones, the recipient uses it by presenting it at the point of sale, where it is swiped like a credit or debit card. For e-voucher cards, the recipient will provide the card number at the time of purchase. The gift card can be used until its balance is depleted.
• Transactions and balance: each time the card is used, the amount of the purchase is deducted from the card’s balance. This continues until the card’s balance hits zero.
• Checking the card balance: most card issuers allow you to check the remaining balance of your card online, by phone, or in-store. To do this, you typically need the card number and, in some cases, a personal identification number (PIN).
• Expiration and fees: under U.S. federal law, gift cards cannot expire within five years from the date they were activated. Some cards also come with fees, such as inactivity fees, which are typically only allowed to be charged after one year of inactivity. The details should be disclosed to the shopper at the time of purchase.
• Reloadable gift vouchers: some cards, like those offered by certain retailers or banks, can be reloaded, allowing you to add more funds to the card.

The Types of Gift Cards

There are also bank or credit card-issued gift cards, such as Visa ones. These can be used anywhere that accepts regular credit cards from the issuing bank.

Here are the most common types available:

• Retail cards: issued by specific retailers like Amazon, Target, Macy’s, or Best Buy and can only be used in those particular stores or on their websites. They can cover a wide range of items, from clothing and electronics to home goods and books.
• Restaurant cards: issued by specific restaurants or fast-food chains like Starbucks, McDonald’s, or Olive Garden. They can only be used in those specific eateries, allowing the recipient to enjoy a meal of their choice.
• Visa, MasterCard, and American Express gift cards: these cards aren’t tied to a particular retailer. Instead, they can be used anywhere that accepts regular credit and debit cards – both at physical stores and online. They offer the best flexibility but might come with an activation fee.
• Gas station cards: these cards are from specific gas station chains, allowing you to pay for fuel or any other items available at the station. They’re a practical gift for anyone with a vehicle.
• Entertainment cards: these cover a broad category – from iTunes for music and movies, Google Play or Steam for games and apps, to Netflix or Hulu for streaming services. They’re an ideal gift for many people thanks to their versatility.
• Grocery store cards: issued by specific grocery store chains, these gift cards can be used for daily necessities. They’re a practical gift, especially for college students or families.
• Charitable cards: some organizations offer gift vouchers that allow the recipient to donate to a charity of their choice. They’re an excellent option for socially conscious givers and receivers.

Most Common Uses of a Gift Card

1. Gifts for special occasions: use them as presents for important milestones, like birthdays, weddings, graduations, or holidays. Recipients can pick out the perfect item or service to suit their needs.
2. Corporate gifting: companies often distribute gift vouchers to reward employees and show their appreciation. Cards can also be used as incentives to increase sales and motivate employees to reach certain objectives.
3. Rewards and incentives: Offering customers gift cards as rewards is a great way to boost loyalty and encourage them to come back. For example, businesses can give out cards to those who refer new customers or take surveys.
4. Charitable donations: gift cards are a great way to give to charity. You can use them to make donations to a specific organization or cause, helping to spread awareness and encouraging people to make a difference in their community.

The Benefits of a Gift Card

The most prominent benefit of voucher cards is allowing the receiver to choose what product or service they want, ensuring that the gift will be appreciated. They’re also convenient for the giver, requiring less time and effort than purchasing a traditional present.

Here are some of the primary benefits of using a gift card:

1. Personal yet flexible: they strike a perfect balance between personalization and flexibility. They allow you to show that you know the recipient’s preferences (for instance, their favorite store or restaurant), yet give them the freedom to choose what they like.
2. Convenience: there’s no need to spend hours hunting for the perfect gift. They are easy to buy – many are available online – and simple to send. E-gift cards even eliminate the need for packaging and shipping, arriving instantly in the recipient’s inbox.
3. Ideal for long-distance gifting: if your loved ones live far away, sending physical gifts can be a hassle due to shipping costs and delivery times. Gift vouchers eliminate these issues, reaching your loved ones quickly and without any risk of damage or delay.
4. Budget-friendly: they can be loaded with any amount, which means you can stick to your budget while shopping for presents.
5. Reduces gift returns: there’s less chance of your present being returned or exchanged. The recipient can choose exactly what they want, ensuring the gift is something they’ll enjoy and use.
6. Great for last-minute gifts: gift cards (especially digital versions) can be a lifesaver. You can buy and send them within minutes.
7. A solution for hard-to-shop-for people: We all have people in our lives who are a challenge to shop for. A gift card eliminates the guesswork, letting loved ones pick out something they genuinely need or want.

Gift Vouchers FAQs

What is a Gift Card?

It’s a prepaid debit card that contains a certain amount of money available for use for a variety of purchases.

Are Gift Cards Safe to Use?

Yes, they are safe to use. They work like cash, with a preloaded amount that can be used for purchases either in-store or online, depending on the card. Just ensure to buy them from reputable sources to avoid scams.

Can Gift Cards be Reloaded with More Money?

That depends. Some cards, such as those from certain retailers or banks, can be reloaded. However, many cards, like those from particular restaurants or generic MasterCard and Visa voucher cards, are not reloadable.

What if I Lose My Gift Card?

Policies vary by retailer, but the general rule is that if you lose the card, it’s gone. Some retailers may offer a replacement if you have the original receipt and the card number.

Can a Gift Card be Used More than Once?

Yes, they can be used multiple times, as long as there is still a balance remaining on the card.

Do Gift Cards Have Expiry Dates?

By law, gift cards cannot expire within five years from the date they were activated. However, it’s still important to check the specific terms of your gift card.

Can Gift Cards be Tracked?

Retailers can track card usage, including the purchase and redemption of cards, but they generally cannot track who is using the card.

Can I Redeem a Gift Card for Cash?

Generally, voucher cards are intended for use at the designated retail store and cannot be redeemed for cash. However, some states do allow their redemption for cash if the balance goes below a certain limit.

What if My Purchase Exceeds the Balance on My Gift Card?

If your purchase exceeds your card balance, the additional amount can be paid using other payment methods, such as cash, credit/debit card, or another voucher

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