Posted by Mike Smith :: May 29, 2008 @ 7:00 amIn the past, I've written about the negative aspects of using gift cards. Electronic gift certificates have some advantages over physical gift cards, but some merchants limit their effectiveness and inspire you to spend more.
Physical gift cards are often sold in fixed denominations. As more stores carry gift cards for other merchants, it makes sense that they would carry standard denominations such as $10, $25, and $50. In my grocery store alone, you can purchase about 50 different gift cards. When shopping directly with the merchant that offers a service, you would expect to be able to specify nearly any amount. I could, for example, walk into my nearest Target and get a gift card in any amount that I choose. They just swipe the card, enter the amount, and ask for payment.
You would expect electronic gift certificates to have similar flexibility. I have started to notice that many service providers limit the denominations of the electronic gift certificates. As if that weren't frustrating enough, they often set the denominations to be different from the cost of services they provide. As an example, the digital photo printing service Shutterfly has prepaid plans that cost $15, $35, and $60. Yet their gift certificates come in $10, $25, $50, $75, and $100 denominations. Sure, you could purchase multiple certificates to get to some of the service amounts, but to cover the service with one certificate means that you would have to buy more than you really wanted. The advantage of buying one certificate is that it makes a more presentable gift. I've noticed similar practices with XM Satellite Radio and I'm sure that it exists with many other merchants.
In the electronic age, there is no reason to limit the denominations of gift certificates to discrete amounts. Consumers are forced to overspend when the only amounts offered are different from the cost of the desired service. If the extra amount goes unused, it's truly a waste of money. That is like forgetting that the store borrowed money from you. Pay careful attention to the amount you spend on gift certificates to ensure that they can be used effectively for the services you intend.
2 Comments
Great post buddy. I work for a company that manages and tracks gift cards, and I blog about gift card related issues on savvywallet.com. I totally agree with you. Look at it this way. Consumers spent $100B on gift cards last year and around $8B was lost/unclaimed. The thing of it is, retailers want people to come back and spend more money. It's the name of the game, and it's how they make money, and it's why they love gift cards. Rarely does it equal out to exactly the amount. What's worse is having .45 cents on a gift card, and not knowing what to do with it. It's money, but it's not money we can use. There needs to be a policy on every card that if the balance is less than 10 bucks, you're able to cash it out.
Electronic Gift Cards are a trend retailers want to promote. This is an opportunity for them, thanks to the saving in logistics, to provide more value to consumers, especially in the 2009 economy.
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