Gift Card Blog - ScripSmart

3 Things Consumers Get About Gift Cards That Consumer Experts Don't

Black Friday is fast approaching and the chatter around holiday gift card giving is picking up. While there are some helpful and productive pieces published by the media this time of year, many fall short of offering solid gift card advice for consumers.

There's a disconnect

One thing is clear, most consumer experts don't like gift cards; meanwhile, most consumers like gift cards. A disconnect between the advice of consumer experts and the preferences of consumers is nothing new; however, it's time for many experts to take another look at the gift card advice they are giving to consumers.

Before I begin, at ScripSmart we both identify and develop solutions to the pitfalls of gift cards. Gift cards are not perfect; from ScripSmart's list of gift cards to avoid to our rating system, Gift Card Score; ScripSmart frequently points out the downsides of gift cards.

That written, some of the advice out there is simply not helpful for consumers and at times it's flat out wrong.

Disconnect one: Gift cards are popular with gift givers, not gift receivers.

This type of story often implies the notion of gift cards being an easy way out, impersonal and often a last minute decision. In short, the only reason gift cards are popular is because it's convenient for the gift giver and if you give a gift card you're doing the recipient a disservice.

The reality is most consumers like receiving gift cards. According to a the National Retail Federation's 2011 Annual Holiday Survey, gift cards are once again the most requested gift with 57.7% of survey respondents indicating they'd like to receive a gift card for the 2011 holiday season.

Here are the results for the past eight years, as you can see gift cards are actually gaining in popularity:

Naturally, there are people who don't like to receive gift cards, but I think it's important to let the gift giver discern whether a gift card is appropriate for their recipient.

Disconnect two: A wise alternative to a gift card is cash. 

According to this line of reasoning cash has no strings, no fees and can be redeemed anywhere. Therefore, it's a better gift than a gift card and should be used in lieu of gift cards.

The truth is, cash is not always a viable alternative to a gift card. For example, one might feel a bit uncomfortable by giving their child's teacher cash to show appreciation during the school year. On the other hand, a Target Gift Card seems quite appropriate.

Personally, I love cash and it can make a great gift. However, when it comes to giving consumers gift card advice, telling people to "give cash, not gift cards" is a bit like telling people to never use credit cards when offering credit card advice. While the advice will certainly achieve a desired result, it's just not very helpful to most looking for advice on the subject.

Furthermore, Gift Cards aren't just for gift giving. Retailers are continually using gift cards as a way to compensate consumers. Walmart, Amazon, and Apple are just three of many. In other words, gift giving is just part of the gift card story. Consumers are obtaining gift cards form a number of sources.

Disconnect three: Gift cards should be avoided because some are never redeemed.

I've seen estimates claim as little as 5% to over 25% of gift cards go unredeemed each year. Under this line of thinking, there is a good chance the gift card you buy will never be used, so think twice before you waste your money on a gift card.

I'm of the belief consumers are pretty smart and don't like to waste money. Ironically, not wasting money is a big part reason gift cards are so popular: we all hate receiving unwanted gifts; worse yet, we hate giving unwanted gifts. Ultimately, people feel the money placed on a gift card has a better chance of being used wisely than if they simply pick a gift for the recipient.

Gift cards have their place

It turns out they have a pretty big place in our culture of gift giving. According to the Tower Group, an estimated $100 billion in gift cards will be sold in 2011.

While there are certainly occasions where a gift card is not an appropriate gift, it's important to recognize not all gift cards are created equal, not all gift cards are bad and most consumers are capable of determining whether or not a gift card is appropriate.

I'm off my soapbox. What do you think?

Walmart Uses Gift Cards For Christmas Price Guarantee

As part of the Walmart's Christmas Price Guarantee campaign, the company will issue gift card to consumers instead of cash. The program starts November 1st, 2011 and runs through Christmas Day. In short, if you purchase an item at Walmart and find it for less, they company will issue a Walmart Gift Cards  for the difference. Check out the full details here.

A Growing Trend: Gift Cards Not Just For Gifts

I've written about the trend of merchant's using gift cards to compensate consumers before. This is another example of a company leveraging it's gift card program in a nontraditional way. There are several reasons why companies like to offer consumers gift cards instead of cash. Here are three reasons:

1) Walmart knows where the money will be spent.

2) Gift cards bring consumers back to the store at a later date.

3) Often consumers spend more than the gift card's balance.

In the future, you can expect to see gift cards used for more than just gift giving. In fact, I recently received a $5 Target Gift Card for making a purchase at Target. Basically, instead of needing to use a $5.00 off coupon, I paid full price for the product and received my gift card at the checkout counter.

Buy A Home Depot Gift Card, Donate 5% To Veterans

The Home Depot has teamed up with The Mission Continues to launch a "Celebration of Service" fund-raising campaign. There are several ways to participate, one of which is buying a Home Depot Gift Card.

If you buy a "Celebration of Service Themed" gift card from now until Veterans Day, November 11, 2011, The Home Depot will donate 5% of the face value to help complete 200 service projects in 60 days which are aimed specifically at improving homes, facilities and community centers where veterans live and receive services.

This is a rather clever gift card promotion and just another way gift cards are being used for more than just gift giving. Cheers to The Home Depot for coming up with a great way to promote their gift card while giving back to the country.

The Best Of Both Worlds

Just to clarify: the great thing about this promotion is you get the full value of the gift card and the great feeling a donation is being made on your behalf. For example, when you buy a $200 Celebration of Service themed Home Depot Gift Card, you'll still get the $200 gift card and the home depot will donate $10.

Full details of the promotion can be found here on the The Home Depot Foundations website.

American Express Launches An eGift Card

Earlier this week, American Express launched a new product: the American Express eGift Card. We recently added our review of the gift card and it performed well for a bank-issued gift card.

Here are a few things to know about the new American Express eGift Card:

1. $2.95 Purchase fee
2. No expiration
3. No post-sale fees
4. Delivered via email
5. No shipping fees
6. Requires activation by the recipient
7. Only redeemable online and via phone
8. Unused gift card may be refunded

The Trade Off

The American Express eGift Card actually has a higher Gift Card Score than the traditional plastic American Express Gift Card. This is mainly a result of purchase fees. The big trade off here is the restriction of not being able to use the gift card in-store in exchange for lower purchase fees.

That being said, it is possible the American Express eGift Card would work in-store. It just depends on the merchant's ability to manually key in the gift card number because there is nothing to swipe.

A Growing Trend: eGift Cards

Visa, MasterCard, Discover and American Express have historically not offered an eGift Card option to consumers. It's great to see American Express offer another option with lower purchase fees. Naturally, it would be even better if American Express could guarantee the egift card could be used in-store. I expect to see more egift cards enter the marketplace over the coming years.

Be sure to checkout our current and full review of the American Express eGift Card.

Blockbuster Has It's Gift Card Holders Singing The Blues

Update 12/15/11: Blockbuster has started selling gift cards again. The old gift cards are still not accpeted for payment; however, I'm told old gift cards will be exchanged for 5 free movie rentals and blockbuster employees can not check the balance of old gift cards. My thougts here.

The Blockbuster gift card became worthless five months ago. Late March 2011, Consumers were given just two weeks notice to redeem their gift cards or lose their value. Unfortunately, two weeks is not nearly enough time to get the word out to gift cardholders; there are still many who are unaware the gift card they own is now worthless.

This event was a result of DISH Network, Inc. purchasing the Blockbuster business and choosing not to accept outstanding Blockbuster Gift Cards.

To be fair the Bankruptcy Court did not require the buyer of Blockbuster to honor outstanding gift cards. In either case, DISH Network could choose to accept Blockbuster gift cards at anytime. 

As more time goes by, the chances of Blockbuster Gift Cards being honored become less likely. If you own a Blockbuster Gift Card, don't throw it away, yet. There is a chance it will be accepted at some point in the future.

Here are a few reasons Blockbuster should choose to accept the gift cards:

1. Not Accepting Is Bad For The Brand

When a company is purchased out of bankruptcy and the business maintains the same branding, locations and staff, it's hard for consumers to understand why their gift card is no longer accepted. Understandably consumers feel duped by the new owner. Just take a look at the blockbuster gift card complaints listed as comments from my original blog post covering this matter.

For example, one woman writes:

"I spent an hour looking for movies to rent as well as my little kids. Once we were ready to check out and pay for the movies we wanted to rent using the blockbusters gift card, I was told they were no longer acceptable cuz Dish networks bought out blockbusters. I had never seen any postings or warnings about it. My kids and I walked out without any movies. What a disappointment and shame. The stores are still called Blockbusters instead of Dishbusters. Why?!"

Unfortunately, DISH Network is more concerned with acquiring Netflix's customer base than retaining the existing Blockbuster customer base which own gift cards. In fact, my local Blockbuster has a huge sign reading: "Tired of seeing red? Say hello to Blockbuster".

I say Blockbuster has it's gift cardholder singing the blues. 

2. Not Accepting Is Bad For Consumers

When DISH Network acquired Blockbuster it was not announced how many gift cards or the total dollar amount of which was expired. One can assume the outstanding balance of gift cards is significant because it was specifically excluded from the purchase agreement by the Bankruptcy Court. Furthermore, DISH Network has decided not accept the gift cards and in turn damage the brand it acquired.

As a result of their decisions, Dish Network, Blockbuster and the Bankruptcy Court have taken money out of a lot of consumer's pockets.

3. Not Accepting Is Bad For Gift Cards

It's no secret, gift cards often receive a bad rap from the media and consumer advocates. At ScripSmart, we think there is more to the story than "give cash not gift cards" advice. Events like this are a big reason why consumer advocates do not like gift cards. Unfortunately, this scenario will be played out again in the future, only with different names as buyers and sellers.

ScripSmart offers a list of gift cards to avoid, Gift Card Scores, and free user accounts to help consumers get the most from their gift cards. One step gift card issuers could take is a money back guarantee. Basically, the business would keep the money with a trusted third party and should the business go under, the cash is safe and consumers can get a refund for the gift card. Unfortunately, there is no gift card which offers such a guarantee.

In the meantime, be sure to take a look at the Gift Card Score before making your next purchase.

 

Gift Cards For Good Attendance Offered By Las Vegas School

After truancy rates fell below state standards, The Delta Academy in Las Vegas is trying something new to get students to come class with $10 in gift cards each week. School administrators see it as a positive solution to a serious problem where punitive measures failed in the past.

It's important to note: this incentive program is more than just consistent attendance; students will also be monitored on grades and their behavior before receiving a $10 gift card to the retailer of their choice each week such as a Best Buy Gift Card.

Gift Card Controversy

The Delta Academy has set aside a $90,000 budget for incentive programs. Naturally, that's tax payer money and the program is causing quite a stir in Las Vegas. While this might seem like bribery, I empathize with The Delta Academy. It's a charter school responsible for teaching kids who were placed at the school from other schools in Clark County School District after of poor grades, behavior problems and other challenges.

I'm interested to see how this one turns out. It's my understanding positive reinforcement is more effective than negative reinforcement. I wish the The Delta Academy the best of luck in improving student interaction and producing better members of the community.

Here's the full story from Fox 5 Las Vegas reporter Stefanie Jay:

 

Why Keeping Your Gift Card In A Mobile App Is A Smart Idea

A couple of weeks ago I wrote about Jonathan's Starbucks Gift Card. In short, it was a gift card people were sharing; strangers would both add and reduce value in a pay-it-forward social experiment. The experiment brought up several questions, most about human nature; however, for me, it raised the question: are mobile gift card apps safe for consumers?

The Future Of Gift Cards Is Mobile

There is no doubt the future of mobile payments is bright and gift cards will be a big part of the action. The Starbucks Gift Card App has been tremendously successful with consumers and for good reason: they are easy to use, automatically keep the balance and best of all you'll always have the gift card in your pocket. However, the Jonathan's Card Experiment demonstrated one important vulnerability of mobile gift card apps which create bar codes to be scanned at the checkout counter.

Easy To Duplicate, Hard To Identify

The Jonathan's Card experiment worked because people could use an image of the Starbucks Mobile App which included the bar code of the gift card and use it for payment. This image is displayed on the right and if displayed on an iPhone, it looks just like the real application. This makes it difficult for the checkout clerk to determine what they are scanning is a duplicate or the original.

Creating this is image is very easy, just take a screen shot of the iPhone with the original mobile app. It's possible a smart phone could end up in the wrong hands, the card duplicated and the owner might never know.

Less, Not More Risk

It begs the question: if you add your gift card to a mobile app  which produces a bar code image of the gift card, are you increasing the risk of losing the value of your gift card to fraudulent use?

In short, the answer is no. After all, a person must still access the application on your mobile phone, take the image and send out the image to others. I don't see this as any more of a possibility than having a wallet lost or stolen. Furthermore, the Starbucks Mobile App has the option of being locked with a password and most smart phones can also be locked with a password. I can't say the same for a wallet.

If you own a gift card and there is a mobile app for it, I think it's a smart decision to use it. Just be sure to dispose of or hold the original plastic gift card in a safe place.

The Mobile Apps Version Of Scratch Off Security

When scoring gift cards, our algorithm likes to see a scratch off security code on the back of plastic gift cards. Its' a great way to prevent fraud. Perhaps a Mobile Gift Card App version of such fraud prevention would be an animated portion where the gift card bar code is displayed on the mobile phone. This would allow the checkout clerk another tool in determining if the bar code being show is authentic.

What do you think? Do you use mobile gift card apps when available? Are they better than keeping it in your wallet?

Community Starbucks Gift Card Terminated: Jonathan's Card

There's been an interesting experiment going on with a special Starbucks Gift Card called "Jonathan's Card". In short, it's a gift card which strangers were both adding and reducing the value. Think of it as a shared gift card. Simply by showing an image of the gift card's barcode (generated from Starbucks iPhone app), anyone could access the card.

Paying It Forward

I love paying it forward concepts like this and see the gift card as a natural fit. While sharing the value of a gift card is against the terms of the Starbucks Gift Card, Starbucks was actually cheering on this experiment. (It's great advertising for the product.) Looking at the twitter feed for the Jonathan's Card, there was a lot of activity of increasing and decreasing the value.

Fraudulent Use - Gift Card Terminated

Unfortunately, Jonathan's Card has been canceled by Starbucks. People can no longer add value or use it to pay for coffee. Starbuck's decided to pull the plug because some people were abusing the gift card and exploiting the nature of the program. (Not great advertising for the product.)

Apparently, Jonathan is not the only person who has clever ways to use a Starbucks Gift Card. Another developer wrote a script to check the balance of the card and transfer funds from Jonathan's Card to his own personal Starbuck's Gift Card. Apparently he transferred $625 in just 5 hours. Naturally, a person could easily sell the card to a number of third parties who sell discounted Starbucks Gift Cards and receive cash.

While this experiment is officially over, gift cards are consistently being used in new and interesting ways. This experiment also raises some interesting questions about the security of mobile apps which generate barcodes for payment; expect a post in the near future covering some of the security aspects of mobile payment applications.

Recycle And Get An Apple Gift Card

A growing gift card trend is paying consumers with gift cards instead of cash. I've written about Amazon.com paying consumers for used electronics with Amazon.com Gift Cards before and Apple offers a similar program.

In fact, recently Apple updated their Reuse and Recycling Program to include iPhones and iPads. In other words, you can receive an Apple Gift Card in exchange for recycling qualified "iPhone, iPad, and Mac or PC desktop and notebook computers".

Offering an incentive is a great way to get consumers to responsibly dispose of old and unwanted electronics. Naturally, by giving the consumer a gift card instead of cash, Apple can increase the dollar amount of the reward an be certain the money will be spent within the company.

Gift Card Tip

I price checked an original 16GB iPhone 3G in working order and was quoted $30; keep in mind, that number included free shipping to Apple. While $30 may not be a big help towards your next MacBook and the Apple Gift Card can't be used in the iTunes or App Store; the Apple Gift Card be used to purchase an iTunes Gift Card at the Apple Store.

Gift Card Laws & Groupon's New Terms

Earlier this year, I wrote about Groupon and gift card laws.

Since writing the article, Groupon has changed it's Terms to take more responsibility for the Vouchers it issues on behalf of merchants. Now they specifically state,the "paid for" portion of the Groupon Voucher does not expire.

The old Groupon Terms of Use stated:

"...applicable law may provide that the Merchant is responsible for honoring the cash value that you paid for your Voucher for a period of time beyond the expiration date stated on the Voucher."

The current Terms of Use states:

    "The purchase value does not expire until it is used or refunded...The promotional value will expire by the date stated on the face of the GROUPON unless applicable law prohibits the promotional value from expiring."

A Good Move By Groupon

In my February post, I brought up the notion of gift card cash back laws and why it's obvious state legislators did not intend to include "promotional portions" of gift cards under the law.

Here's a short recap:

If a consumer paid $5 for $10 worth of services, they might be able to use just $5.01 worth of services and demand a cash refund for the $4.99. This implies a consumer would pay just one penny for $5.01 worth of services. That just down't seem right.

At the same time, it's likely state legislators will see the "paid for" portion of a Groupon Voucher as a something very similar to a gift card. Gift card laws are implimneted to protect consumers from having money drained from thier pocket, not to protect promtional value in the fourm of a coupon.

Why It's Not Enough

From the looks of it, Groupon is currently disclosing the promotional value's expiration date, not the paid for value on the actual Voucher. Here is a Groupon from today:

This could easily be seen as a deceptive business practice. After all, most consumers who own such an offer would conclude the value of the Groupon is worthless after the expiration date. In fact, earlier this year, Amway settled gift card lawsuit which has some striking similarities to Groupon's current business practice of placing just one expiration date on each Voucher.

Groupon should specifically include expiration detail for both portions of each Groupon directly on the Voucher.

Clarification Is Needed

Daily deal sites are under a slew of attacks form consumer advocates and lawyers. Just today I learned Connecticut's Attorney General is looking into whether or not Groupon's fall under Connecticut Gift Card Law. I look forward to the day when this is all cleared up. It will be benifical to both consumers and the companies who issue daily deals with the hope of growing their business.