A few weeks ago, a gift card manager from a company who sells bank-issued gift cards reached out to let me know there were some inaccuracies on ScripSmart for her product. Naturally, we quickly corrected the data and I thanked her for reaching out. Then our conversation took a more philosophical direction: one of ScripSmart's algorithm and how it rates bank-issued gift cards. In short, she thought ScripSmart was not giving bank-issued gift cards a fair shake.
Heads up: I'm using the term bank-issued gift cards to refer to gift cards which have a Visa, MasterCard, American Express or Discover logos and can be redeemed anywhere their credit card counterpart is accepted.
She brought up some very good points as to where ScripSmart was falling short. I explained there was currently a distinction in the algorithm for bank cards (recognizing they can be redeemed at multiple independent businesses), but for the most part we had focused on store-issued gift cards and her points were valid. (As of today, ScripSmart has rated 776 gift cards and just under 5% are bank-issued.)
Areas of improvement
Here a few places where ScripSmart's algorithm may change:
- Some bank-issued gift cards offer consumer protection if it's fraudulently used, e.g. Visa Zero Liability.
- By law, bank-issued gift cards can not be reloadable (money laundering concerns).
- Bank-issued gift cards do not have the same risks of becoming worthless as the result of a bankruptcy. This is a big plus: both the Borders and Blockbuster gift cards are now worthless.
- Some banks sells bank-issued gift cards without charging a standard purchase fee, however only those who are customers can buy the gift cards.
- Gift card registration: in order to use a bank-issued gift card for online purchases, the cardholder must add a billing address to the gift card. Some gift cards offer phone and online registration others offer just phone phone registration, and believe it or not, some can not be used online.
- An industry norm is the requirement of valid thru' dates. It's the result of leveraging the credit card industry's current system and there are no bank-issued gift cards which do not have such a date.
The list above is by no means a final list of what will change. However, there is clearly an opportunity for ScripSmart to help consumers understand the difference in quality among bank-issued gift cards and produce ratings which better reflect the marketplace.
A problem with the rating system or a problem with the products?
Another point came up on the call: there are currently no bank-issued gift cards which rank in ScripSmart's top tier and receive our gold badge. It begs the question: Is this a result of the products in the industry being unfriendly or is ScripSmart's algorithm missing the mark?
Frankly, I think it's a little of both: bank-issued gift cards are often riddled with fees and some monthly inactivity fees are as high as $5 a monthly which seems onerous. On the other hand, there are bank-issued gift cards which have no fees, never expire and are clearly a best of breed product, but they score in the green.
It's unclear how this will shake out: we've already started testing changes to our scoring alogrithm, but nothing has been finalized. In the end, ScripSmart is focused on producing fair, accurate and helpful ratings of gift cards and there is clearly an opportunity for us to improve how we rate bank-issued gift cards.