Are Bank Issued Gift Cards Too Risky?
Gift cards are a familiar sight in the vast majority of retail stores today. They can be bought in values as little as ten dollars all the way up to hundreds of dollars. A lot of people buy them because they can be put towards anything that that location or chain offers. This has transformed them into an easy gift idea for those on your list that are difficult to buy for. However what do you do when you are not sure where the person on your list is going to shop? That is where banks have stepped in to offer their own kind of gift card.
A bank authorized gift card is virtually identical to a regular gift card aside from the fact that it may be redeemed in any store that accepts credit cards electronically. This seems perfect but there are a few issues you should be cognizant of before you purchase this kind of card.
When a store sells you a gift card they get your money without having to hand over any product right away which is why many stores sell them. This is the same as an interest free loan. It also has the added appeal for the retailer that a certain percentage of gift cards never get used. For the majority of cards that are used shoppers frequently spend much more than the card’s denomination which helps to boost sales. All of this has helped give rise to an industry that doesn’t simply create the plastic cards but also adornments like gift card holders and a wide number of clever gift card packaging to give it the feeling of a more substantial present.
Banks watched these trends and decided to get into the game themselves. While these cards look and act like regular gift cards there are a number of key differences. Contrary to a retail card, bank authorized cards usually have an additional purchase fee tacked on. This means that you can expect to pay $55 for a gift card that has a value of $50.
Many bank issued cards also come with an expiry date. This is unlike retail gift cards where in certain areas of the country they are not allowed to expire. But you could come across other fees that can eat away at your card’s value. It is not uncommon to have a monthly maintenance fee that is charged once your card is activated. Although they usually have a grace period of a few months. And be careful if your card is lost or stolen since there may be a substantial replace cost.
There is a concern these days that if a store goes out of business any remaining gift cards would be worthless. It is also true for bank authorized cards. Many people see a major credit card company’s name on the gift card however it is the issuing bank that is liable for its value and if that financial institution disappears so to does the gift card’s usefulness.
Even with all of the negatives a bank authorized gift card are still be a great and flexible way to send someone a present. Just make sure you and the person you are giving it to are aware of all of the fine print.
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