Gift Card Meaning
Gift Card Meaning - Julia Kagan is a financial/consumer journalist and former managing editor, personal finance, of Investopedia. A gift card is a prepaid debit card that has a fixed amount of cash available for use on a variety of purchases. Store gift cards are designed to be used at specific merchants or retailers, while general-purpose prepaid gift cards are not tied to a specific merchant and can also be used to withdraw cash at an automatic teller machine (ATM).
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Gift Card Meaning
A gift card is a form of prepaid debit card loaded with funds for future use. There are generally two types of gift cards: open-loop and closed-loop. Both types can generally be used online and in person. Many gift cards will have a minimum and maximum initial load amount.
For example, the minimum can be $10 and the maximum can be $500. In some situations, a gift card can be used to pay for part of a purchase, using cash, debit or credit to offset the cost. As a precaution to reduce the risk of loss, many gift cards can also be registered online, a process that allows the remaining balance to be tracked and frozen if the card is lost.
Thus, some gift cards are safer than cash. Depending on the card in question, a top-up fee may apply each time money is added. Closed-loop gift cards are often marketed through stores, allowing the cardholder to purchase anything from that specified retailer. Closed-loop cards can usually only be used with one merchant, either in-store or on their website.
What Is A Gift Card?
However, if a company owns multiple retailers, it can issue gift cards that can be used at any of them. Gap Inc. (GPS) is one such company: its cards can usually be used interchangeably at any of its affiliated stores, including Gap, Banana Republic, Old Navy, and Athleta.
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Closed-loop gift cards typically do not require an activation fee. Also, these gift cards will not include the processor's logo (the financial services company that actually operates the transaction mechanisms), although they may include the merchant's logo; In a sense they act as shop advertisement.
Closed-loop gift cards are usually not reloadable, so once the balance is spent, they have no use. Additionally, the funds on a closed-loop gift card may have a specific expiration date, requiring the user to use the card within a certain time. CCTV cards are popular gifts for weddings and baby gifts.
Many merchants also offer closed-loop gift cards as a bonus to people who sign up for their registry. According to Persistence Market Research, the global gift card market is projected to achieve a CAGR of over 12% through 2031. Open-loop gift cards offer a cash equivalent or, more accurately, a credit or debit card that can be used at any merchant where such cards are accepted, as well as online.
How A Gift Card Works
Many major credit or debit card issuers/processors offer open-loop gift cards, such as American Express, Visa, Discover and MasterCard. These cards will display the payment processor's logo and can be used to make all types of electronic payments almost anywhere. Open-loop gift cards also have the advantage of working as standard prepaid cards.
These cards are usually reloadable, allowing the user to add funds on their own. Open-loop cards sometimes require an activation fee of about $5, which must be paid when purchasing the card. Gift cards originated in 1994, according to MegaPlaza, a marketplace extension of open source commerce platform Magento.
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Increasingly, merchants are choosing to offer digital gift cards to customers as an incentive to encourage spending. Upscale department stores, such as Saks Fifth Avenue and Bergdorf Goodman, send bonus gift cards to members of their loyalty programs (those who spend a certain amount during a promotion or during a certain period).
However, according to a National Gift Card (NGC) industry survey, 75 percent of gift card program redemption volume is still in physical cards versus 25 percent for digital gift cards. Gift cards are increasingly becoming a target for scammers. According to the Federal Trade Commission (FTC), consumers reported $148 million in losses from gift card fraud in the first nine months of 2021.
Closed-Loop Gift Cards
These scams mostly revolve around scammers asking customers to purchase gift cards as a form of payment. The consumer provides the gift card number to the scammer under the assumption that they are making a legitimate payment. The thug then leaves with the money. Another scam involves tampering with physical cards in stores.
Fraudsters manipulate the card to obtain the gift card number. When a customer purchases a card and loads money onto it, fraudsters can use the card to make purchases and steal those funds. Target gift cards are particularly popular among fraudsters, accounting for a reported loss of $35 million in 2021.
Avoid buying gift cards in stores that have been damaged or tampered with, and only use gift cards to make payments to people you know and trust. That you believe in. A gift card is a prepaid card that can be used to make purchases and make other types of financial transactions.
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Gift cards can be open-ended or closed, which can determine where and how the card can be used. Yes, you can use a gift card to withdraw cash from an ATM if your card allows it. Generally, this is only an option with open-loop cards, which are not tied to any store or commercial brand.
Open-Loop Gift Cards
Depending on the card, a gift card may expire if the money loaded onto it is not used within a certain period of time. You can also pay a fee to activate a new gift card or withdraw money on an existing gift card. Some prepaid gift cards may also charge a monthly or inactive account fee.
Gift cards can be useful for shopping online or in stores. You can buy them to give as gifts to friends and family, or you can get a gift card as a reward when you shop with a particular merchant. Understanding how gift cards work and where you can use them is important to avoid the risk of fees or gift card expiration.
At the same time, it's important to watch out for gift card scams, especially during the holiday season when more people are buying them and using them to make purchases. Consumer Financial Protection Bureau. "§ 1005.20 Requirements for Gift Certificates and Gift Certificates." Accessed December 12, 2021.
Bureau of Financial Consumer Protection. "Choose the right card for your situation." Accessed December 12, 2021. National Gift Card. "Even in the digital age, 3 out of 4 loyalty points are redeemed for plastic gift cards." Accessed December 12, 2021. Federal Trade Commission. "FTC Data Shows Dramatic Rise in Gift Cards as Scam Payment Method."
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