A gift card is essentially the electronic version of a traditional paper gift certificate. As we all know, a gift card is easy shopping and a way to give a gift while allowing the recipient to choose the items he or she wants. Typically, the gift giver buys a card from a merchant or bank for a specified amount of money. The recipient can either buy something, or, in most cases, redeem the card for cash.
Gift cards are big business. According to a Consumers Report survey, they are the most-wanted gifts for women and the third most desired gift by men in the U.S. The 2007 survey found that 62 percent of consumers planned to give cards that year, second only to clothing, which 71 percent planned to give.
Two types
Consumers can choose between two basic types of gift cards. More popular are the cards consumer purchase from retailers, called closed loop cards. They can be used only at the retailer’s store (and perhaps at other stores owned by the parent firm). Retailers usually do not charge to buy or use their cards.
Bank-issued, or open loop, gift cards are typically associated with a major credit card. Most merchants that accept that credit card will also accept the cards. Banks charge a fee to buy a gift card; other charges may apply.
Innovations
The gift card industry is dynamic and innovative, constantly finding new ways to apply the gift card concept and expand the technology.
Interactive gift cards have content burned into them. Some have a hole in the center and play like DVDs. Depending on the retailer, these interactive cards may have video games, music downloads, and purchasing suggestions and offers.
Personalized cards allow purchasers to choose from different designs and even upload their own images for the cards. This turns an impersonal gift into a customized and personal one.
Online gift cards are purchased online and sent via email, reducing the production and processing costs for the retailer. Such virtual gift cards offer a high level of personalization, with customized product promotions and incentives.
A variety of online marketplaces offer discounts on gift cards. Some sites allow consumers to search for the desired product or product category and buy cards for them. Gift card exchanges allow people to sell or exchange unwanted cards.
Perhaps the most innovative application connects cards with live and interactive TV and Internet programming. The industries of the gift card companies are incorporated into the content of the programming segment. Viewers can purchase cards in real time as they watch. In many cases they also receive bonus cashbacks for gift card purchases they make during the interactive programming segments. Programs are typically broadcast seven days a week on specific networks and during particular TV shows.
Pros and cons
For merchants and customers, gift cards have many advantages. As with all business transactions, consumers should read the fine print and make sure they understand the costs and limitations of the cards before they purchase them.
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