Gift Card Shipping Advice (1/6/08)

The US Postal Service knows what can go wrong with the mail, and this article has some good tips about how to send gift cards. Personally, I feel about as comfortable sending gift cards through the mail as I do cash.

Gift Card Stats (12/27/08)

The Tower Group holiday gift card sales preliminary stats are in (article): $61 billion in gift card sales for the fourth quarter 08 as compared with $70 billion last year. That is going to be a little more than the 5% drop they had earlier predicted for full year 2008. The most intesting tidbit from their report is that open-loop gift cards are expected to be almost half of those sales, at $28 billion. This as compared with open-loop gift cards making up about 35% of gift card sales last year.

This information is very important when you consider that almost no state or federal laws that apply to gift cards apply to open-loop ones.

Inside Job (12/25/08)

There have been more and more instances of employees getting caught putting value on their own gift cards instead of customers gift cards when they purchase them, like this story from Wal-Mart. This is in addition to the scams where people scan gift cards still on the shelves and then clone them when they are activated. If you purchase a gift card or receive one, it behooves you to check the value the minute you get it home.

More Gift Card Breakage Stats (12/23/08)

According to a recent report from TowerGroup, 27 percent of gift cards bought this year will not be used and $6.4 billion of the expected $88.4 billion in gift cards sold this year wil not be redeemed (about 7%). That is lower than the usual figure of ten percent thrown around for breakage. With 27 percent of gift cards not used (and a bunch more not fully used), clearly, gift cards with little value on them offer little motivation to be redeemed.

KB Toys - Yikes (12/23/08)

Because of a deal reached today between New York AG Cuomo and KB Toys, you have until Jan 11 2009 to redeem your KB Toys gift card. but only in New York, and not online. After that, you are probably SOL. (article)

What is really interesting from the article though, is this statement:

"KB Toys sold as much as $2 million in gift cards this year alone, and currently holds a total of $12 million in unredeemed gift cards. "

What? Either people saw the writing on the all about KB Toys and avoided buying their gift cards, or KB Toys shows six years worth of gift card sales as unredeemed on its books. Could the size of gift card "breakage" be way larger than anyone thinks?

More "Fair Gift Card Act" details (12/23/08)

Sen. Charles Schumer announced today details on what he calls the "Fair Gift Card Act" that he hopes will be passed next year. Those details include gift cards being free of fees for two years, and thereafter a maximum of $1 in fees per months. Sounds like a solid improvement. Incidentally, from this letter I found from Consumers Union, it sounds like Sen. Schumer has been trying to get such a law passed since 2004.

If you care, I urge you to contact Sen. Schumer and asking him to include open-loop gift cards in his bill.

Where Not to Buy Gift Cards (12/4/08)

This story about a drug ring selling fraudulent gift cards makes me thing that perhaps eBay and Craigslist aren't the best places to buy gift cards online. Perhaps using on of the sites listed on our resources page would provide a potential for a refund of the card turned out to be bogus.

Schumer Eyes National Gift Card Law (12/4/08)

Sen. Charles Schumer will be introducing Federal Legislation that makes gift cards good for at least 5 years and makes the fees that whittle down gift card balances illegal. While it would be nice to have a single consistent Federal Law rather than the mich-mash of state laws we have now, there is still no talk about including open-loop gift cards in the legislation. Open-loop gift cards are among the worst offenders in the not-well-disclosed and very unreasonable fees game.

Navigating State-by-State Gift Card Laws (12/1/08)

Manhattan Advertising & Media Law (a law firm) has put together this handy state-by-state map for looking up the gift card laws.

Retailers to Form Industry Group to Protect Consumers (12/1/08)

My first thought at hearing that a group of retailers was forming a group to protect consumer interests for gift cards, was something about a fox guarding a henhouse. But this actually sounds like it might be a good thing if they truly stick with the principles they are initially suggesting that members be held to.

From the totally useless department (12/1/08)

Does anyone really need an iPhone app made specifically for purchasing gift cards? GiftCertificates.com launched just such an app recently. (story)

Illnois Adds Gift Card Law (12/1/08)

Illnois has a new gift card law that takes effect on Jan 1st, 2009 and requires that gift cards last for a minimum of 5 years and bans non-use fees. The new law applies only to gift cards purchased on or after Jan 1, 2009. Like every other gift card law, it does not apply to general purpose (open-loop) gift cards. (article)

From the Cheese Department (11/19/08)

Technically, this isn't related to gift cards. But, in the cheesey shenanigan department, gift cards kind of remind me of another classic cheesey scam, mail-in rebates. Mail-in rebate processors are more slippery than health insurance companies, if that is possible. Well, things in the mail-in rebate department just got a lot worse as one of the large mail-in rebate processors just filed for chapter 11 (story). Try getting your rebate now!

Gift Card Negativity (11/19/08)

I contantly monitor all kinds of news and blogs for information and articles related to gift cards. These days, a healthy majority of articles are negative and are related to the riskyness of gift cards because of bankruptcies, how much gift cards sales will drop this holiday season, and how gift cards in general are a bad idea because of high fees and such. Is this the end of gift cards? I seriously doubt it. Trends of the last few years show that consumers are oblivious to the negative aspects of gift cards despite gobs of information on how bad some of them are. Surveys are projecting a 6% decrease in gift card sales this holiday season; when you compare that to spending on other things, such as a 30% drop in vehicle sales and the huge drop in sales that many consumer companies are experiencing, you could actually call gift card sales projections pretty strong, relatively speaking.

Gift Cards with Banks FDIC Insured! (11/17/08)

This is a BIG deal! The FDIC today issued an opinion stating that funds on gift cards and other stored value cards are FDIC insured if they are issued by an FDIC insured bank. (article) To my knowledge, there haven't been any bank failures that have resulted in gift card holders being left out in the cold, but that seems a very likely scenario given the way things are going.

The FDIC further clarified this order (on 11/25/08) after an NPR news story that said the FDIC backing applies to all gift cards. It doesn't, just to prepaid cards issued by FDIC backed banks.

Circuit City Gift Cards (11/15/08)

Looks like Circuit City will again be accepting its gift cards (article), with the recent court approval of its desire to do so. I think the difference between Circuit City and the other recent bankruptcies that involved large sums of unredeemed gift cards (i.e. Sharper Image and such) is that Circuit City appears to really want to stay in business. It's a step in the right direction.

The Best Gift Cards is No Gift Card (11/12/08)

Quoted in this article, consumers union recommends that people avoid giving gift cards this holiday season.

Consolation Prise (11/11/08)

Is this where the industry is heading? Sorry, we ate up all your card value with fees but as a consolation your worthless gift card is a camera worse than the one on your phone.

American Express Now a Bank Holding Company (11/11/08)

American Express sells a lot of gift cards. Today, according to this article Amex was approved by the Federal Reserve to become a bank holding company. What this means for gift card holders is that there is a new venue to complain about problems with Amex gift cards. As a bank holding company, Amex will be overseen by the Federal Reserve. You can find out more about the Federal Reserve's consumer compalint process here.

Face Value (11/10/08)

Consumer reports says that 25% of gift cards go unused each year. A commonly accepted breakage value (the amount of gift card value that doesn't get spent) is 10% of the total amount on gift cards sold each year. For these two numbers to make sense, the cards that go unused must be heavily weighted in the smaller values. Perhaps the psychology behind this is that people are less likely to forget about a gift card with more value on it.

Fun with Numbers (11/6/08)

While there are a lot of players in the gift card resale market, most of them are bit players; you can tell by the number of listings for cards they have on their site. One site that appears to be one of the smallish players is MonsterGiftCard.com. I wouldn't mention them, except they put out a press release about a HUGE 40% increase in sales in one month. Um, a big increase on something small is still something small. Their site still only lists less than 100 gift cards for sale. This huge increase in sales must be the reason their URL is appraised at a whopping $2,000. When I clicked the Update this Data link on their page at Website Outlook, their value went down by about $100 and their daily pageviews dropped from 598 to 551 from 33 days ago. Hmmm. When I checked the data for plasticjungle.com, one of the leaders in the space, its value and pageviews went up from two months ago.

Simon Gift Cards Disclosure Problems (10/30/08)

A New York appellate court came down hard on Simon Malls gift cards for their poor disclosure of fees, citing among other things fonts sizes smaller than allowed, fee information being burried in the fine print agreements, and for setting fees at grossly excessive amounts. (article)

More New Gift Card Laws (10/25/08)

Maine's new gift card laws (article), allows anyone to cash out gift cards with a balance of less than $5.

Michigan's new law (article) states that gift cards must be valid for a minimum of 5 years, issuers may not charge inactivity fees or other service fees, must not alter the gift cards terms & conditions after it is issued, and must not fail to disclose the terms & conditions.

It is unclear whether either of these new laws appy to open-loop (Visa, Mastercard type) gift cards. Most state laws for gift cards do not apply to these type of cards.

Bad Habits (10/22/08)

A recent article (Old Gift Cards are in Season, WSJ 10/22/08) in the Wall Street Journal places the blame for gift card breakage partially on consumers shoulders for their bad habit of waiting or forgetting to use their gift cards. While I agree that this behavior is clearly common among consumers, I think it is based on a fundamental misunderstanding by consumers in thinking that their gift cards will continue to hold value indefinitely. Perhaps we just think it would be the reasonable thing to do.

The article also notes a trend where consumers are digging deep looking for old gift cards to use up and how this is good news for retailers. While most retailers wait to book profit on sales from gift cards until they are redeemed, they do eventually benefit from unused gift cards when they claim unused balances as breakage.

However, while retailers may benefit when gift cards are used because they can claim profit, they also benefit from the cash flow that unused gift cards provide them. When older gift cards are used, retailers may be able to book a profit, but they don't get the cash flow from a non-gift card purchase.

Strangely Quiet (10/20/08)

The real news is the lack of news. Since I've started paying attention to all things gift cards, the general economic meltdown has sucked all the oxygen out of a lot of other news and there has been very little interesting to report lately. Seems people don't care about their last few bucks on a gift card when their 401k has gotten a serious haircut.

If you find any interesting gift-card related tidbits (and I'm not talking about how Costco is selling Starbucks gift cards 20% off ... we're not that kind of gift card site) please send them our way.

Canadian Province of British Columbia Adopts New Gift Card Regulations (10/18/08)

British Columbia has joined Alberta and a number of US states in banning gift card expiration. They also prohibit handling charges or fees except in limited circumstances. As with most such laws, once again open-loop (Visa, Mastercard, etc.) type gift cards are excluded from the new laws. Is it that Visa and Mastercard are such a strong lobbying force, or do lawmakers not fully understand how difficult they are to use up completely? (article)

Gift Card Gotcha Guide (10/18/08)

This guide on eBay is actually a pretty good list of gift card gotchas.

Holiday gift card trends (10/14/08)

A survey report released recently predicts that the overall spend on gift cards this holiday season will decrease by 5%, that people will be using their gift cards less on frivolous stuff and more on necessities (so far this is all pretty obvious), and that open-loop gift cards (or what they call prepaid bank cards) will be the most desired by recipients due to the fact that they can be used in more places.

By some estimates, open-loop gift cards made up as much as 35% of all gift card purchases in 2007. Could we be headed for 50% for 2008? It will be interesting to see if breakage (the amount of the spend on gift cards that never gets redeemed/spent by consumers) increases or decreases in 2008, and whether or not this can be attributed to the increase in open-loop gift cards being bought. I suspect that open-loop gift cards have a higher breakage rate than closed-loop ones, even though they can be used in more places, because it is so hard to use the last few bucks on them.

Google Trends (10/9/08)

Searching Google Trends for the words "gift card" tells us what we probably already know:

Gift cards are REALLY poplular during the holdays!

How can you not notice $150,000 gone? (10/9/08)

This story about a restaurant employee pocketing the cash and then giving customers zero value gift cards sure sounds bad for gift cards. But is it really? How can customers try to redeem $150,000 in invalid gift cards that should have been valid over 9 years and the management not notice that something was going on? Baffling.

Amex gift cards scammed (10/4/08)

The scam played out with Wal-Mart gift cards is a well known one; thieves scan the cards on the rack, wait for them to be activated by checking the Wal-Mart website, and then with card writers, program gift cards with the same info and use them before the purchaser to buy stuff from Wal-Mart, which they then return for cash.

Here is a story about the first time this scan has played out on American Express gift cards. If you have bought Visa, Mastercard, or Amex gift cards from a display at Safeway, Walgreens, etc. they are very well packaged such that you can't scan the card until the package is opened, so that someone used this scam is a surprise to me. Perhaps the cards were on display without such packaging.

Gift Card Mall Expands (10/1/08)

As I've explored the world of gift cards for my own business, I've frequented the places where they are sold. The largest selection of gift cards I've seen is at grocery stores like Safeway. Until today, I wasn't aware, but the those displays are called "Gift Card Malls" and are provided by a company called Blackhawk Network, a Safeway subsidiary. Now they will be installing their displays in Staples stores.(article) While I myself am highly suspicious of the gift card industry, I'll admit that gift cards do have their benefits. The displays at Safeway in particular with their large selection of gift cards are great for some, ahem, last minute holiday or birthday shopping. :)

The Gift Card Advocate is now on MySpace and Facebook (9/24/08)

Just trying to spread the word so more people can find this useful information.

Find me on MySpace and be my friend!

Here I am on Facebook

Gift Card Site Explosion! 9/23/08)

I now count 28 sites on our list of gift card buy/sell/trade/swap/transfer sites.

Gift Card Sales Slower (9/19/08)

For the first time in many years, gift card sales are expected to be lower this year. (article)

Alberta Bans Expiration Dates (9/16/08)

The province of Alberta, Canada is the latest to ban gift card expiration dates. (article)

Buy.com Screws up Split Tenders (9/16/08)

Apparently Buy.com had a software glitch in its POS software such that for a while when people payed partly with a gift card and partly with a credit card, it never charged the credit card. So it is charging them now, one or more years later. (article)

I guess you snooze you lose isn't a legal doctrine.

Poor Gift Cards (9/16/08)

I can't make this up:

"According to a new survey from the National Research Network, the perception that gift cards are impersonal is the top inhibitor for consumers purchasing gift cards ..." (article here).

With over $90 Billion in US gift card sales last year, the industry doesn't seem very inhibited. As a matter of fact, lots of people I know LIKE the fact that they are anonymous.

Bankruptcies & Gift Cards (9/14/08)

The big news in the last several days is Consumers Union, along with several other consumer groups petitioning the FTC to create new rules to protect gift card holders in cases of bankruptcy. Here is Consumers Union's description of the petition.

Balance Check (9/12/08)

I recently ran across an article in the Washington Post from February of 2006. The article talks about how difficult it is to use up small amounts left on Visa and Mastercard Gift Cards. A couple of quotes from the article caught my eye:

"Visa spokeswoman Rhonda Bentz said the company was unaware of the problem of split transactions until The Washington Post raised the issue. "Now we'll be looking into it," Bentz said."

"MasterCard and American Express officials said they have been slowly rolling out new technology to make it easier for merchants and gift card users to know a card's balance so it can be used with cash or another credit card to buy something for more than the card's value."

Very very few merchants allow you to check the balance of your gift card. Visa's site lists about 15, while Mastercard's site lists none, but says "some" can. Split transactions have not gotten any easier in the last two an a half years either.

If these companies are working on fixes to these problems, global warming appears to be melting glaciers faster.

Prepaid Debit (9/11/08)

Speaking of terminology, an article in todays Wall Street Journal talks about "prepaid debit" cards. As debt among college students has risen to record levels in the last several years, colleges have gotten criticized for allowing credit card companies to agressively promote credit cards to students on campus. In response, many colleges have limited credit card companies ability to hawk credit cards to students.

The result, according to the article is that banks are now pushing what they call prepaid debit cards. These are essentially the same as the open-loop (Visa, Mastercard, etc.) gift cards, but they are of the reloadable variety. Essentially the same product but with a different name.

Oh, by the way, these cards are really loaded with fees.

What's in a name? (9/10/08)

The term "gift card" is a pretty generic one. There are quite a few other names used for sub-categories and classifications of different types of gift cards by industry insiders.

Open-Loop: An open-loop gift card is one that can be used in more than one store. Open-loop gift cards belong to one of the major networks; Visa, Mastercard, American Express, and Discover.

Closed-Loop: This is any card that can be used in one store or chain of stores only. For instance, Target, Home Depot, or Starbucks

Stored-Value: The strict definition of a stored-value card is a plastic card encoded with monetary value on a magnetic stripe. In addition to open-loop and closed-loop gift cards, prepaid phone cards, payroll cards, and transit cards also fall into this category. For most pracitical purposed, these days, money isn't stored directly on the card, but in a database somewhere. It is very hard to tell whether there is any subtle differentiation between the meaning of stored-value and prepaid these days.

Prepaid: Here is a definition I found from the Federal Reserve (here): The term prepaid was associated with products for which the prefunded value is recorded on a remote database, which must be accessed for payment authorization. So defined, the term prepaid describes most of the products on the market today. There are a variety of applications for prepaid cards, including gift cards, payroll cards, flexible spending account cards, government benefit cards (such as food stamps), insurance claim cards, employee reward cards, travel cards, remittance payment cards, and transportation cards. Most prepaid cards serve a single purpose, but there are a few cases in which multiple prepaid functions are combined on one card. In addition, some cards, such as payroll cards, government benefit cards, and transportation cards, can be reloaded with value, while other cards, such as travel cards, insurance claim cards, and most gift cards, cannot.

Debit card: All of the open-loop cards issuers classify their cards as debit cards (they say DEBIT on them). When you do a transaction, it performs a debit from an account that has money in it. The difference between gift debit cards and bank debit cards that also hav a Visa or Mastercard logo is that gift debit cards (as far as I know) do not required you to enter a PIN when you use them. Actually, this is part of the problem with open-loop gift cards; despite their popularity with consumers, many merchants seem to be clueless as to how to run them. I've often been asked to provide a PIN when using a Visa gift card when none exists.

The growth of gift cards II (9/9/08)

When you type in a domain name, like www.giftcardadvodate.org, the internet's domain name system does a translation from that name to the actual address (like 192.168.1.23) that identifies the machine the website can be found on. The ZONE files are the files that the top level of the domain name system uses to start the name to address translation; these files contain every domain name registered at any given time.

I've had access to these files since 1998 and have versions from various years between then and now sitting around. I thought it would be interesting as another view into the growth of gift cards to see how many domain names contain both the words "gift" and "card" at differnt times in the last decade (graph on the left):

These are only .com domains. The graph includes some basic interpolation for the years I don't have data for. If you are intested in the actual domain names registered in each year, here is the raw data: 1998, 2000, 2002, 2003, 2007, 2008. The graph on the right is the size of the gift card market according to an article in the Journal of Economic Perspectives.

The growth of Gift Cards I ( 9/8/08)

Google News Archive (historical news archives) has a great feature that shows a timline with the frequency a search term shows up in articles. Searching on "gift card" gives the following timeline.

This is a pretty good representation of the rise of gift cards. This timeline has gift cards on the scene way before I thought they were popular, which I previously thought was 2002.

Before about 1998, a gift card was a card that came with a gift apparently if you look at some of the hits. 2008 is smaller because it is not yet done (duh).

Also interesting, I found a reference to prepaid Visa gift cards from 2000. I think that after 9/11, pressure was put on the debit card gift card issuers to make them scarce because they were hard to trace (i.e. National Security issue). They disappeared for a few years mostly and then started making a comeback in the last few years. They were certainly a lot harder to find a few years ago than they are now. In 2005 I could only find them at the mall; now they are in just about every grocery store.

Gas Station Debit Holds (9/8/08)

I've seen stories about debit card holds at gas stations since the Spring. The problem is that at a gas station, where the pump authorizes payment before it knows how much gas you will pump, it typically does an authorization for $50 or $75 first and then when you are done, releases the hold and runs the correct amount. These holds can stay on for quite a long time. With debit cards, this can tie up your funds, which is a problem if you don't have a lot of funds.

With gift cards, the side-effect of holds can make your cards very hard to use. My experience has been that holds on gift cards can last up to 30 days for authorizations that are correctly cancelled. When merchants process credit cards online, it isn't possible to tell if any information is incorrect (CVV or expiration date) without doing an authorization, which puts a hold on the funds for up to 30 days, even if it is cancelled. Just how long is up to the cards issuing bank. Basically, you can lock up your gift card funds easily if you try to use it online and type in some of the info wrong.

Well, in the latest issue of Consumer Reports, there is an article about Consumers Union and other groups putting pressure on Visa and Mastercard to fix the debit hold problem, at gas stations in particular. Looks like Visa is moving to a real-time clearing process for gas stations.

I am curious to see the effect this will have on gift cards. One side-effect of the debit hold process at gas stations, as I found out by accident once, is that you can go to a gas station with a $50 gift card, it will do a pre-authorization for $50, and then you can charge more than $50 of gas on the card. This works at some, but not all gas stations. I wonder how often this happens. Like most cases of fraud, the merchant, not Visa, probably eats the loss in this case.

Recycling Gift Cards (9/6/08)

I found this post today regarding a service now being offered to collect used gift cards so that they can be recycled and turned into new gift cards. Seems to me the missing step is actually being able to completely use up your gift card before the service fees eat it alive or you just simply give up on it.

Gift Cards & The Main Stream (9/5/08)

Searching Google News today for stories on gift cards, what I noticed is that almost all the stories I found that contained the term "gift c ard" are about companies that are giving out gift cards as rewards and such. Clearly, gift cards are becoming a way of life.

Gift Card Holders Unite! (9/4/08)

According to this Wall Street Journal blog entry, one Sharper Image gift card holder filed a class action suite on behalf of the Sharper Image gift card holders that are owed $19 million to make sure they are considered as creditors in the bankruptcy procedings.

Welcome (9/1/08)

Thanks for visiting giftcardadvocate.org. From my own difficulties using gift cards, I have done and continue to do a lot of research into how they work, the legal options for gift card related problems, options for gift card holders, and the industry in general. This site came out of my desire to share the information I found out and to help create more solutions for gift card users.