Gift credit cards can be useful and much-appreciated gifts, but it is important to understand what they are and how they work, and to check the terms and conditions of your particular card. Each issuer has different fine print relating to their cards, and some of the clauses in the fine print can be costly.
What Are Gift Credit Cards?
A gift credit card is actually not a credit card in the traditional sense of the word. A holder of a traditional credit card makes purchases on credit, and pays the bill later, when it falls due. A gift credit card is a stored value card, or debit card. A certain amount of money is deposited into the card by the purchaser at the time the card is issued, and only that amount of money may be spent using the card.
If you think about the old-fashioned paper gift certificate still issued by many major retailers, you will have a more accurate notion of the nature of a gift card than if you think about a credit card in general.
Who Issues Them?
Some retailers have switched from using paper gift certificates to issuing gift credit cards. While these store-specific gift cards have the disadvantage of being limited to use in a particular store, this is offset by the benefit that generally charge lower fees than more general gift cards.
Gift credit cards are issued by major credit card providers, such as Visa, Mastercard, Discover, and American Express, both directly and through banks. Each issuer has their own particular set of terms and conditions.
What Are The Problems?
Some issuers limit gift cards to use within the USA. Others will not allow them to be used for certain purchases, such as air tickets or hotels. American Express will not issue gift cards to the residents of five US states, because, according to American Express, “restrictive legislation” makes it prohibitively expensive to do so.
Gift credit cards issued by Visa and Mastercard can usually be used in most places around the world where Visa and Mastercard are accepted, with the exception in some cases of specific types of purchases. It is very important to read the terms and conditions to make sure you, or the recipient, will be able to make use of the card as you expect.
In some cases, gift cards can be used at ATMs to withdraw cash. Obviously, this is not the case with store-specific gift cards, and it is not available as an option in all cases, even with Visa and Mastercard gift cards. If you wish to have this option available, you will need to research carefully before choosing your card.
Check your terms and conditions to understand the fees payable. In most cases, it is a costly mistake to keep a balance on your gift card for more than a few months. Most providers have expiry dates on their gift cards, or start charging relatively costly monthly fees after a particular time period has passed. In some cases, the balance on the card at the expiry date is simply lost. In other cases, the card issuer will send you balance by check – less an account closing fee and a check drawing fee which can add up to $30 or thereabouts, and often consume the balance completely anyway.
If you have chosen the right gift credit card, you will be able to give a gift which is as flexible as cash, but as personalised as a gift certificate. If you have received a gift credit card, you have no choice about the issuer, so make sure you read the fine print, so you can avoid any unwanted fees or complications.