Gift Cards Can Be Good
You can barely walk thru a grocery store or many other outlets without seeing racks and racks of gift cards. Are they safe and are they as convenient as promoters would have you think they are?
The Office of the Comptroller of the Currency (OCC) offers guidelines for issuance of Gift Cards. Unfortunately the OCC guidelines are nothing more that that – guidelines. They are not law. So gift card purchasing is strictly a “Buyer Beware” environment.
Gift Cards from some very conscientious sellers can be an awesome gift. They offer convenience and practicality. Gasoline credit cards, store discount cards, retail specific gift cards, prepaid telephone and credit cards and so many more can all lead to a gift giving buyers dream of convenient shopping and idea generation. They can be easily mailed and can be a very well received by the recipient. But generally gift card promotion and popularity has less to do with customer convenience and far more to do with incredible profitability.
The Retailer Simply Cannot Loose.
Consider the fact that a gift card is for a specific amount. If the recipient uses the card for less than the full card amount of the gift, the balance usually remains on the card to be used for the same service or at the same location. But often times a balance remaining of less than $5 usually remains on the card and this is pure profit for the issuer. As an example a $15 gift card for a CD that costs only $13 will usually have the remaining $2 remain on the card until expiration. The thought is, what are you going to buy for $2 and the issuer knows this.
On the other hand, if the recipient uses the card for more, the additional amount of purchase is from the recipient’s pocket. For example, let’s say the same consumer from above elects to use the extra $2 for a second CD. Now the retailer has just made more money from an add-on purchase. The retailer simply cannot loose.
Additionally the consumer is obviously required to be at the establishment. The single greatest advertising cost is the cost of bringing in new customers. But gift cards are a free method of accomplishing this purpose. PR newswire on January 9, 2008 reported: “Fifty-three percent of gift card redeemers often or always spend more than the card value, and most likely over two store visits rather than one.” Not bad for simply offering a piece of plastic.
Buyer Beware
Now lets consider less than conscientious sellers:
OCC suggests the expiration date of the gift card should be on the front of the card. Is it? (Considering that a gift of money would not expire at any point, why does a gift card expire?)
Are any fees monthly or otherwise listed? Some cards have a $2.50 monthly fee tacked on after a certain period of time. It does not take long to significantly reduce the amount of purchase at that rate.
Issuers should not advertise “no expiration” if fees eat at the balance if not used immediately.
Cards should have some means of contacting a customer service. Does it?
Obviously theft of cards has to be a major concern simply because of the same convenience as stated for the consumer.
Gift cards lead the market of the 81 billion dollar pre paid industry and are expected to top 52 billion dollars in the next 5 years. That being the case, it is unlikely that gift card will disappear very soon. Hopefully what will disappear however are the scams and abusive practices some promoters utilize. Gift cards are sufficiently lucrative never to need such practices.
Readers will probably be interested to know Mike, the author of this article, also offers a free debt elimination mini-course via e-mail. You can enroll at Debt Free In 7.5 Years.
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Frequently Asked Questions
Employee or independent contractor?
By: jamesmusik | 01-10-2008
I have been working for a company most of this year as an independent contractor, but I believe that for tax purposes I should be considered an employee and therefore not be subject to self-employment tax. My work is directed by the company, I was trained by employees of the firm, they provide all the equipment I need, they give me the work to do each day, I am paid hourly, 3 employees do the same tasks at times, and the contract requires me to notify the company of potential "conflicts" in any other agreement before I can enter into that agreement. The contract says I'm a consultant and I provide invoices of time worked rather than timesheets. First, is the IRS likely to consider that self-employment?
Second, if that is not self-employment, I need to know how to proceed. Should I plan on paying the self-employment tax when I file my return in April and attempt to get it back after the IRS makes its decision on my SS-8? Or should I file the SS-8, not pay the self-employment tax, and wait for the decision? Also, would I still owe some of the self-employment tax, even if I was misclassified?
What does CIB VRTC stand for?
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What does CIB VRTC stand for?
I have credit score of 650 income is in the 30 bot ...
By: robbierob | 30-09-2008
I have credit score of 650 income is in the 30 bot with overtime is 45 my wife income 26 credit score is 750 currently have mortgage of 435 looking to get rental property in fl for about 170 putting 40 down can I get approved.E loan recently said I need to get my credit score to 680,i sent all three credit agency letter of satisfaction of child support ,how long does it take to increase my credit score.
Identity theft
By: Corpsman's Girl | 30-09-2008
can a person get a home loan if he has recently had his identity stolen? a friend is currently in the court system with the person who stole his identity but he wants to buy a home.
Beck: american musician
By: Martin Dorff | 30-09-2008
I'm making a documentary on American musicians. So, if anyone can help me out with this rather curious question, I'd be extremely grateful. Q: What is the estimated NET WORTH of alt-folk-rock musician BECK?
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By: Gordon | 30-09-2008
I am 85 years old with a small amount of savings in Money Market. I am old enough to remember the crash of 1929 and fear that our present financial problem could turn out to be similar to "29". Are money market funds vulnerable and do they have any insurance?
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