What Are the Pros and Cons of Gift Cards?
Almost all retailers offer consumers gift cards as a way to shop or give money to friends, both in the online and brick-and-mortar variety. There are two types of gift cards—physical and digital (e-gift cards)—and each comes with a wide range of features and benefits.To get more news about
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If you’re interested in purchasing gift cards for others during the holiday season, 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 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. For example, if you have a gift card that’s branded with the Visa logo, you could use it to make purchases anywhere Visa is accepted.
A closed-loop card, on the other hand, can only be used at specific merchants. For instance, if you purchase a gift card from Starbucks or Amazon, you or the gift card’s recipient would be able to use them to make purchases only at the retailer issuing 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, but that is expected to change in the near future.
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.
You can also store codes for digital gift cards inside a mobile wallet app, such as Google Pay, Apple Pay, or PayPal’s Venmo. Then, when you’re ready to check out, you can select your digital gift card as your preferred method of payment.
In terms of gift giving, gift cards might be preferable if you have no idea what to buy for someone on your gift list, as they allow the recipient to buy what they want and when they want. Just keep in mind that if you’re choosing closed-loop gift cards over open-loop cards, that limits the giftee’s options for where they can use the 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.
What Are the Pros and Cons of Gift Cards?
