Holy cow! According to this article by the Australian Herald Sun 30% of the $1.2 billion Australians spend on gift cards this year will go unspent.
The main reason seems to be that Australian law doesn’t restrict expiration at all and my gift cards expire after only 12 months. Another difference between Australia and the US is that the government allows retailers to keep all the breakage as profits rather than turning them over to the state as unclaimed property.
We haven’t followed the mobile gift card space much, other than to say that having a gift card on your mobile phone makes it much more likely that you will have it when you need it. But it looks like the technology hasn’t quite been perfected yet and offerings by some popular retailers, Target and Starbucks can still fall prey to the oldest of gift card hacks, copying the card data while it is on the rack, cloning the card, and then when activated by a customer, spending it before they do. Making gift cards mobile makes it even easier for thieves to perpetrate this scam as they don’t need any fancy card writers.
Perhaps closed-loop retailers that offer gift cards should solve this fraud problem once and for all before dragging it into new offerings like mobile gift cards.
Gift cards have become a necessary evil in today’s society. Even if you don’t buy them, they are so ubiquitous and easy (read, lazy) as last-minute gifts, you are bound to receive one or more per year. So anything that makes gift cards easier to use is Ok by us.
It is no great secret that close-loop (store specific) gift cards are the better deal vs open-loop (Visa-type) gift cards; they typically have no up-front charge and do not carry fees. Most state laws, and the new Federal laws, make them last a long time and you can cash out the last few bucks in many states.
That why this multi-restaurant gift card that a group of restaurants in Connecticut have created is such a good idea; it combines the convenience of an open-loop gift card with the value proposition of a closed-loop one.
Apparently MasterCard and Visa are clamping down on the use of prepaid (reloadable?) debit cards for use at online gambling websites to comply with the Unlawful Internet Gambling Enforcement Act (UIGEA). It isn’t clear whether this applies to just some of the vendors of prepaid cards (Vanilla Visa, NetSpend) or all of them. It also isn’t clear if it applies to non-reloadable prepaid and MasterCard and Visa branded gift cards.
I came across a recent promotion touting “Eclipse MasterCard debit cards: Collect them all.”
That made me wonder, is anyone that interested in a prepaid debit card to actually collect them? Somehow I don’t see debit cards as collectibles like baseball cards (as in someone would want to collect them now) or nostalgia items (as in they will be worth a lot in a few decades).
Mobile gift card company Giiv, which allows people to send virtual gift cards to peoples mobile phones via SMS for companies including Amazon.com and Krispy Kreme, raised $3.35 million in venture funding, which complements their previously raised $2.3M.
Actually, instead of a gift card, the recipient receives a store redemption code, which can then be exchanged for a real gift card.
Oh great, now you have two ways to lose your gift card, you can delete or forget about the text, or lose or forget about your gift card.
I’m not sure why this offers a significant benefit over a normal gift card, other than making giving a gift card even more lazy on the part of the giver. Now, you don’t have to bother even picking up or shipping your gift card.
Trying to be edgy and prove they fit in with the younger crowd (which just by the nature of their service they probably do), they call their service texting with benefits.
It is always interesting to compare the perspective of industry trade groups with those of consumers, consumer advocates, and legislators. Take for instance this article, which talks about the new gift card rules and their effect on the prepaid card industry. The article quotes the Network Branded Prepaid Card Association.
By the NBPCA‘s estimate, more than 90 percent of prepaid gift cards are drained of funds within a month after they are purchased.
Really? How then can breakage exist at a level of 10% of the face value of these cards? This also goes against a common sense experience of prepaid gift cards, which is that it is VERY VERY HARD to completely use them up, due to the fact that so few merchants understand how to do a split tender transaction or have the ability to determine the remaining balance on a card.
A UCLA student managed to pilfer over $16,000 off of other peoples Visa gift cards over the course of a couple of weeks. It isn’t yet clear how the student got hold of the gift card numbers.
We have yet to see open-loop gift cards that are not packaged well enough so that their sensitive information is not hidden away from casual viewing. Someone would have to open the packaging to be able to copy the gift card numbers, which would be required to steal money from them, and open-loop gift card packaging is very sensitive to tampering.
One possibility is that the student was able to take steal the cards, open the packaging in such a way so it was overlooked by the purchasers, and return them to the store. Always a good idea to inspect the packaging closely when you buy one of these cards.
As we’ve reported on several occasions, States are getting more and more aggressive at appropriating gift card $$$ from retailers that are considered unredeemed. It is a long shot, but as Consumerist reports, it is worth checking States unclaimed property lists to see if there is anything under your name.
But, even if getting any gift card $$$ you’ve long forgotten about back is a long shot, it is a good practice to check unclaimed property lists periodically. Doing so about a year ago I found $1,500 that belonged to my wife (from her former employer) and around $1,000 that belonged to my brother-in-law’s sister. I also found about $100 that belonged to my father (long-dead AT&T account overpayment). You never know what you will find.
Often times, when a closed-loop gift card received from another person is a pain. It might not be for something you use very frequently, and thus not very useful. Unless the giver really nails it by giving you a gift card to an establishment that you frequent, the gift cards can sit around for a long time before being used, if ever.
Of course, you can sell it for less than face value at any one of the many gift card buyback or trading websites, or sell it on Ebay.
On the other hand, I like the idea of buying gift cards for myself for businesses that I DO frequent if I can get them at a discount, such as from one of the gift card resale businesses.
So it is with great interest that I recently found quite a few discounted gift cards at Costco. In this sense, they are really discount cards, as I am not gifting them to anyone but buying them for myself. On average, the restaurant gift cards Costco offers are at a 20% discount. Not a bad deal.
A troubling trend that has developed over the last few years has been States extending their unclaimed property laws to apply to gift cards, which means stealing away the free money that retailers thought they were entitled to when consumers didn’t use up their gift cards. Many states now do this. I have always assumed that states make little to no effort to find the rightful owners of the gift card money.
But it is actually worse than that.
According to a recent study done by CardHub.com, some states are actually requiring information in addition to the gift card number for consumers to claim their funds, information such as the name of the person who purchased the card and the credit card number used to purchase it.
Which begs the question, if the state has this information, why doesn’t it try to return the money. For that matter, if the retailer had this information, why didn’t it try to contact the customer?
The Consumerist reports that some sites have popped up claiming to allow gift card holders to check their gift card balance. But what they are really doing is stealing the numbers so they can clone the cards and drain them.
Only go to the website printed on your gift card to check the balance.
I am always suspicious about survey results when a survey is performed by an industry group. But the recent Graduation Consumer Intentions and Actions survey done by the National Retail Federation has me scratching my head because it carries a less favorable spin.
According to the survey, almost 60% of people who will give a graduate a gift will opt to give cash, and less than 30 percent will opt to give a gift card. This year cash giving looks to be higher and gift card giving slightly lower. The survey results also frames this as consumers being more practical.
For some reason, iTunes customers in Canada can’t use gift cards to purchase apps from the app store. Seems that this might be in violation of Canadian law as such terms must be disclosed on the packaging so that consumers know the full story before purchase. This little tidbit of information is only available on the iTunes website.
Update 5/26/10: Faced with the option, by Canadian law, of either allowing iTunes gift cards to purchase anything, or update their gift card packaging to indicate the gift card’s limitations, Apple has chosen to allow iTunes gift cards to purchase apps from the app store. Perhaps this is only a temporary remedy until they can update their gift card packaging for Canada, or perhaps the change is permanent. Still no explanation why these gift cards couldn’t purchase apps in the first place.
Security problems with store gift cards are widely reported and have been around for at least five years. As a recent report from StoreFrontBackTalk shows, many store gift cards, including ones from Target and Starbucks, are still allow for the simplest and most insecure of security holes.
This security problem involves someone getting enough information from the gift card on display, such as from a bar code or the numbers actually printed on the card or packaging, so that a thief can clone the card, wait for it to be activated, and then spend the card value before the legitimate customer does.
A general rule of thumb is that if you are able to handle a gift card, so can a thief, so consider the card insecure. This includes dispaly racks such as GiftCardMall found in Safeway and other stores. An exception to this rule is open-loop (Visa-type) gift cards, which include secure packaging that prevents this. In several years of reporting on gift card issues, we have yet to see a problem with open-loop cards in this respect. An exception would be if the packaging looks to have been tampered with to any degree.
As evidenced by this story about an Amex gift card purchased at a Duane Reade pharmacy but not actually activated, mistakes like this can happen.
It is a very smart idea to check the balance of your gift card as soon as possible after you purchase it to make sure it was activated correctly and the balance is as it should be. It is also a good idea to keep your gift card receipt so you can prove your purchase should you have a problem later on. When giving gift cards, include the receipt. Some gift cards will require a receipt for replacement if it is lost of stolen.
Repeat after me, there is no such thing as a collectible gift card.
No one will want to pay more for your gift card because you call it collectible.
Here is yet another story about a Postal employee arrested for stealing gift cards from the mail. We’ve previously reported tips on how to increase the likelihood that your gift card will not be pilfered from the mail, but the question becomes, what if your gift card never makes it to its destination.
The best thing you can do is to report the missing mail to your local postmaster. If they get enough complaints, it can help them find a pattern which can expose a particular employee if theft is occurring.
We recently updated and expanded our comprehensive list of gift card resources – websites that allow you to buy/sell/trade your unwanted gift card away; the list includes over 50 sites now.
Over 10 of these sites are now in the deadpool.
There are very few unique sites. Most follow one of the few business models that has been used for gift cards to date.
A bit of a black eye for Amex and Travelocity on this one. A class action lawsuit accuses them of colluding to charge more for trips when American Express gift cards are used to pay for them than they would otherwise.
Named plaintiff Morris Wilner said he received a $200 American Express prepaid gift car for signing up with Verizon for telecommunications services. He said he discovered the pricing scheme when he tried to use the card to pay for a trip.
Wilner said he visited American Express’s Web site, and was directed to Travelocity’s Awards site, where, using the gift card, he paid $35 more for airline tickets than he would have had he paid through other means.
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