What Are Gift Cards’ Benefits and Drawbacks?

Gift cards are available from almost all stores, allowing customers to spend or present money to friends and family. Gift cards are available in two varieties: physical and digital (sometimes known as e-gift cards), and each has a host of features and advantages.

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It’s helpful to know how gift cards stack up against other payment options if you’re thinking about buying them for yourself or as presents for friends and family this Christmas season, on their birthday, or for any other occasion.

How To Use A Gift Card

Gift cards, sometimes referred to as stored value cards, are accepted as payment at a variety of establishments, including restaurants, retail stores, and petrol stations. You load funds onto the card, which you or the receiver of the gift card can subsequently use at authorized merchants.

Both closed- and open-loop gift cards are available. Wherever that particular brand of card is accepted, you may use an open-loop gift card. You might use a gift card bearing the Visa logo, for instance, to make transactions anyplace Visa is accepted.

Conversely, a closed-loop card is limited to usage at particular retailers. For example, if you buy a gift card from Amazon or Starbucks, it can only be used by you or the recipient to make purchases at the store that issued it. A middle ground alternative are hybrid cards, which let you spend a gift card at a variety of affiliated retailers but aren’t accepted everywhere.

Digital versus physical gift cards

Present cards might be digital or physical, i.e., they can be plastic cards. Instead of having a tangible form, digital gift cards come in the form of a special gift code that you can use to make purchases at online stores. According to recent study published in Psychology & Marketing, gift-card givers believe that physical cards are more in accordance with social standards than digital ones, which may explain why physical cards are still the most popular type of gift cards.

Customers may fill digital or online accounts as well as buy physical cards from retailers including Amazon, Walmart, and Target. Large dining chains like Chili’s, Chipotle, and Starbucks also provide its patrons with both physical and digital gift cards. With the use of these cards, consumers may pay for their meals and beverages more quickly at the register by utilizing an in-store card reader or an app.

Digital gift card codes can also be kept in a mobile wallet software like Venmo from PayPal or Pay with Apple Pay or Google Pay. Then, you may choose your digital gift card as your preferred payment option when it comes time to check out.

Benefits of Gift Cards

There are several benefits that come with gift cards. As an illustration:

If you would prefer not to use a credit card or pay with cash, they might be a suitable alternative method of payment.

Gift cards are a suitable present for any special event, including the holidays.

Gift cards are a useful tool for budgeting and preventing bank overdrafts.

They can be simple and practical to use.

When it comes to buying gifts, if you’re not sure what to get someone on your list, gift cards could be a better option because they let the recipient buy anything they want, whenever they want. Remember, too, that selecting closed-loop gift cards versus open-loop ones may restrict the recipient’s possibilities for how to utilize the cards.

Drawbacks of Gift Cards

Present cards may have certain drawbacks as well. These five are listed here.

There can be a little amount of money left over after purchases are made using a gift card; if this money is not used, either because of forgetfulness or laziness, it is money squandered.

To add money, you can pay purchase or reload costs.

Purchase power is restricted by closed-loop cards.

It may be really annoying to lose or have a gift card stolen, particularly if you didn’t register it or save the gift card number.

In the event that you do not use your card within a year after purchase, you may be assessed an inactivity fee.

Gift Cards vs. Prepaid Credit Cards

It’s critical to recognize the differences between gift cards and prepaid debit or credit cards when assessing the benefits and drawbacks of each. Both may be used to make purchases in physical stores and online. However, although you can buy gift cards to give as presents, if you don’t have a bank account or would prefer not to use cash or a conventional credit card, you can use a prepaid credit card for everyday expenditures.

Prepaid credit card firms provide a variety of cards that allow customers to purchase and load them at physical stores. One such product that makes money transfers between PayPal accounts and actual cards that may be used anyplace MasterCard is accepted is the PayPal Prepaid MasterCard.

PayPal. “Use It Everywhere Debit Mastercard Is Accepted: Freedom to Do What Matters Most.” But be aware that utilizing these prepaid cards might come with a number of costs.

Though regular credit cards can have some advantages when it comes to earning rewards on purchases or utilizing card-specific features like travel incentives or rewards bonuses, prepaid credit cards, debit cards, and reloadable gift cards typically offer better value than retailer-specific gift cards.

When considering whether to utilize gift cards or prepaid credit cards for purchases, it’s important to consider how each may impact your credit score. Since you’re not taking out a loan with these accounts, they are not considered loans and will not appear on your credit reports.

Thus, they don’t contribute to the development of your credit history. A standard credit card can assist you if you’re trying to build or establish credit. Over time, you may raise your credit score by making on-time monthly payments, maintaining low balances, continuing to use older credit card accounts, and reducing the frequency of new credit applications.

Is a Gift Card a Good Idea for a Present?

Gift cards make thoughtful presents for both the giver and the recipient. Choosing a present for someone might be challenging at times, but with an open-loop card from Visa or MasterCard, for instance, the receiver can purchase anything they choose. It may be rather handy to buy and utilize gift cards. Additionally, they might be helpful to the receiver in covering expenses from a certain merchant for events like weddings.

What Makes Gift Cards Unacceptable?

There are several reasons why a gift card can be rejected. For instance, a Visa gift card that has to be activated before being used or whose purchase price exceeds the amount allowed on the card might be declined. Occasionally, a waiting period could be in place to prevent gift card fraud; to find out when the card will be useable, refer to the gift card packaging or your receipt.

Do Gift Certificates End?

The Credit Card Accountability Responsibility and Disclosure (Credit CARD) Act protects consumers by preventing gift cards from expiring for at least five years following their activation date. Furthermore, until there has been no activity on the card for a full year and the card explicitly states the fee’s policy, the card issuer is not permitted to impose an inactivity fee.

Can a Credit Card Be Used to Purchase a Gift Card?

Indeed. Any gift card should normally be able to be bought using a credit card. One advantage of having a rewards credit card is that you may receive points for your purchases; however, not all credit cards allow you to accrue rewards on gift cards. Make sure the card issuer does not regard a gift card transaction as a cash advance by reading the terms and conditions of your card before using it for this reason.

My gift card went missing. What Now?

whether you know the gift card number, it will be simpler to see whether you can obtain a replacement card. Check to verify if the purchase receipt or the receipt from the card’s activation, if you have one, includes the card number. Alternatively, you ought to be able to view the transaction information online if you purchased the card from a website. Next, get in touch with the vendor of the gift card, let them know what went wrong, and inquire as to whether they would provide you a new card.

To stop it from happening again, do the following:

Store your gift cards in the same wallet as your debit and credit cards.

Keep the gift card number secure by writing it down and, if applicable, adding a PIN.

Activate the gift card with an app or mobile wallet.

Take a photo of the gift card’s front and reverse.

Gift cards should be registered with the company that issued them.

Keep the receipt for the activation.

The Final Word

One kind of payment that may be used at retail establishments, petrol stations, and restaurants, among other places, is a gift card. You or the gift card recipient can load money onto the card to spend at authorized retailers. Even if digital cards are more convenient for receivers, physical cards are still the most common. The greatest gift card is perhaps the one that the recipient will be delighted to get and utilize, even if there are more gift cards available than ever before, including multi-store, single-store, and bank-issued cards.