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Gift cards 2013: Reload, please

Survey finds retailers want consumers to pay once to buy, again to reload

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A new survey of gift cards by CreditCards.com and Bankrate.com shows that retailers are increasingly asking us to register and reload our cards, turning them into the gift that takes as well as it gives.

Gift cards 2013: Reload please
GIFT CARDS 2013

Making gift card recipients more loyal and frequent customers by asking them to register and reload is one of the industry's biggest trends, says Michael Hursta, vice president of First Data Prepaid Solutions. "That's creating a new dynamic where merchants are going to know more about the consumers who have their cards, and they're going to have a better ability to provide them with more personalized offers and incentives," he says.

(See full survey results: 2013 gift card comparison)

The ability to register and re-use a gift card also improves the customer experience because it lowers the risks associated with losing a card or having it stolen. When people lose gift cards that are not registered, "it's not that different from losing cash on the street," Hursta says. "You'll never expect to reclaim it." However, if you register your gift card and then lose the card, many retailers will allow you to transfer the balance to a new card.

The focus on improving the customer experience reflects a healthy industry, says Brian Riley, research director for research firm CEB TowerGroup. Consumers like gift cards because they are convenient and readily available. "You can't miss them when you're going to pretty much any major retailer," Riley says. 

In 2012, gift cards accounted for $110 billion in sales, and they are projected to account for $138 billion in sales by 2015, according to CEB TowerGroup.

What the survey found
To gather the data, we surveyed gift cards from 63 brands, including those offered by all the top retailers listed by the National Retail Federation. We also included all general-purpose gift cards offered directly by major financial institutions.

  • More than half -- 36 brands -- are attempting to build long-term customer relationships by offering reloadable cards. Home Depot, iTunes and Shell offered reloadable cards for the first time this year, while Chevron Texaco, CVS and Kohl's got into the reloadable game the year before.
  • Forty-three cards surveyed offer some type of accommodation for lost or stolen cards, though some charge for it. For example, Exxon charges a 15 percent fee to process a new card. Ebay will not replace a lost or stolen card, but when you use a portion of the gift card, the remaining balance is attached to your PayPal account so you can apply the balance to future purchases even without the card.
  • More than half of the gift cards surveyed -- 33 -- have e-cards available. Panera Bread, Wal-Mart and Whole Foods are offering e-cards for the first time.
  • Even more cards -- 53 -- allow consumers to check the balance via the Web.
  • Ten brands charge dormancy or maintenance fees, most of them general-puropse cards offered by banks. Under 2009 federal regulations, dormancy fees cannot be imposed unless the card has been unused for at least 12 months. 
  • Only five of the brands offer cards with expiration dates and all of them are big banks. Federal law says gift cards cannot expire for at least five years after they were last loaded with money.
  • Fourteen brands charge purchase fees.

There are two different types of gift cards. Open-loop cards are those that are redeemable by any retailer and are typically issued by banks or credit card companies (i.e., MasterCard or American Express gift cards). There was one major change this year among open-loop cards: Chase Visa no longer offers new gift cards, though current Chase gift cards continue to be honored.  Closed-loop, or merchant-branded, gift cards are for use exclusively with one retailer. Historically, closed-loop cards tend to have fewer fees associated with them and this year is no exception.

Changes to the gift card landscape
While in years past a gift card might have been considered a last-minute, impersonal gift, that's no longer the case as the sheer variety of gift cards available lets you choose one that caters to a loved one's particular interests. Many retailers are also offering new levels of personalization. For example, Starbucks has added a Braille gift card to its offerings.

One of the earlier complaints about gift cards is that many went unused, whether they got lost in the kitchen drawer or junk fees whittled away at the balance. However, there have been radical improvements on that front. Eight years ago, about 10 percent of cards went unused, while today, the number has dropped to the 1 percent range, Riley says. Part of the reason is because the Credit CARD Act of 2009 eliminated many of the fees and swift expiration dates associated with gift cards, Riley adds.

As brick-and-mortar retailers upgrade their technology, the usage of e-cards will rise, says Ben Kaplan, chief executive officer of CashStar, a developer of digital gifting platforms for such retailers as Starbucks, Best Buy and Dunkin' Donuts. "The digital gifting experience is at its best when the point-of-sale system is modern and can scan QR codes," Kaplan says. E-gift card recipients can still redeem their gifts even if the retailer has not upgraded to the technology by having the card code entered manually at checkout, but the upgraded technology would make the process easier and potentially faster.

Some retailers are coming up with innovative promotions to push digital gifting. For example, Starbucks announced in October that consumers with both a Twitter account and a Starbucks account would be able to tweet their friends an e-gift of coffee.

Digital gift cards will also likely increase in popularity as consumers become more comfortable shopping online. While those who frequent the mall may prefer a traditional gift card, Jen Dorman, a social media coordinator for BeFrugal.com likes to save money by shopping online "so electronic gift cards are more convenient for me," Dorman says.

Published: November 18, 2013



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