1000 USD Free Amazon Gift Card
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Almost all retailers offer consumers gift cards as a way to shop or give money to friends and family. There are two types of gift cards—physical and digital (e-gift cards)—and each comes with a wide range of features and benefits. If you’re interested in purchasing gift cards for others during the year-end holiday season or for birthdays or other occasions, or you want to buy them for yourself, it helps to understand how they compare with other payment methods.
How Gift Cards Work
A gift card—also known as a stored value card—is a form of payment that can be used to make purchases at retail stores, gas stations, restaurants, and other locations. You load money onto the card, which you or the gift card’s recipient can then spend at accepted locations.
Gift cards can be open-loop or closed-loop. An open-loop gift card can be used anywhere that brand of card is accepted. A closed-loop card, on the other hand, can only be used at specific merchants.
Some prepaid gift cards charge a fee to purchase them. You may also pay a separate fee to reload money to a gift card if you wish to reuse it. It’s important to check physical and e-gift cards for expiration dates and/or fees if you plan to reload money to the card.
Physical vs. Digital Gift Cards
Gift cards can be physical—meaning a plastic card—or digital. Digital gift cards have no physical form; instead, you’re assigned a unique gift code number that you can use to redeem at online retailers when making purchases. Physical cards remain the most popular kind of gift cards.
Companies such as Amazon, Walmart, and Target allow consumers to purchase physical cards as well as to load online or digital accounts. Major restaurant chains, such as Starbucks, Chipotle, and Chili’s, also offer customers digital and physical gift cards. These cards make it convenient for customers to pay for their drinks and meals using an app or in-establishment card reader to speed up the checkout process.
Pros of Gift Cards
Gift cards can offer a number of advantages:
- They can be a good substitute form of payment if you’d rather not pay cash or use a credit card.
- Gift cards can be an appropriate gift for the holidays or any other special occasion.
- You can use gift cards to control spending (helpful for avoiding bank overdrafts).
- They can be easy and convenient to use.
Cons of Gift Cards
Gift cards can also have some downsides:
- After purchases are made with a gift card, there may be a small amount of money left, which if not used, ends up as money wasted.
- You may pay purchase or reload fees to add money.
- Closed-loop cards limit purchasing power.
- Losing a gift card or having it stolen can be a headache.
- You could be charged an inactivity fee if you fail to use your card within one year of the purchase date.
Prepaid Credit Cards vs. Gift Cards
When weighing the pros and cons of gift cards, it’s important to understand the distinction between them and prepaid debit or credit cards. Both can be used to make purchases either in stores or online, but while you might purchase gift cards to give away, a prepaid credit card is something you might use yourself for everyday spending if you don’t have a bank account or would rather not pay with cash or a regular credit card.
Prepaid credit cards, debit cards, and reloadable gift cards generally offer better value than retailer-specific gift cards, but regular credit cards can offer some advantages when it comes to earning rewards on purchases or taking advantage of card-specific features.
Is Giving a Gift Card a Good Present?
A gift card can be a good present for both the recipient and the giver. Sometimes it's hard to choose a gift for someone, and an open-loop card lets the recipient buy what they want. Gift cards can be very convenient to purchase and use. And they can be useful for occasions, such as a wedding, to help the recipient cover costs from a particular retailer.
Why Are Gift Cards Not Accepted?
A gift card may be declined for a variety of reasons. A Visa gift card, for example, may be turned down because the purchase price is greater than the funds available on the card or because it has to be activated before it's used.
Do Gift Cards Expire?
A consumer protection afforded by the Credit Card Accountability Responsibility and Disclosure (Credit CARD) Act is that a gift card cannot expire until at least five years after its activation date.
Can You Buy a Gift Card With a Credit Card?
Yes. Generally, you should be able to purchase any gift card with a credit card. If you have a rewards credit card, one benefit might be that your purchase will earn you rewards, though not all credit cards count gift cards towards rewards.
I Lost My Gift Card. Now What?
You may be able to get a replacement card, which will be an easier task if you have the gift card number. If you have the purchase receipt or the receipt from when the card was activated, check to see if it contains the card number. To prevent a recurrence, keep your gift cards in a wallet, record the gift card number, add the gift card to a mobile wallet, photograph the front and back of the gift card, and register the gift card with the company that issued it.
The Bottom Line
A gift card is a type of payment that a person can use to make purchases at retail stores, gas stations, and restaurants, among other locations. Money is loaded onto a card which you or the gift card’s recipient can spend at accepted outlets. Physical cards are still the most popular, though recipients enjoy the convenience of digital cards. While there are more gift cards now than ever—including multi-store cards, single store cards, and bank-issued cards—the best gift card is probably the one that a recipient will be happy to receive and will use.
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