Gift card

Neiman Marcus introduced the first giftcard using a payments infrastructure in late 1994,[6] though Blockbuster Entertainment was the first company to do so on a wide scale,[7] test-marketing them in 1995 and launching them around the country the next year. In the beginning, the Blockbuster giftcard replaced gift certificates that were being counterfeited with recently introduced color copiers and color printers. Blockbuster's first giftcard transactions were processed by what was then Nabanco of Sunrise, Florida Nabanco was the developer of the first third-party platform for the processing of gift cards using existing payment infrastructure.

Neiman Marcus and Blockbuster were later followed by the Mobil gas card, which initially offered prepaid phone value provided by MCI. Kmart was next with the introduction of the Kmart Cash Card, which in the early generations provided prepaid phone time with AT&T. Later Kmart and Mobil dropped this feature, as it was not profitable for them. The Kmart Cash Card was the first replacement for cash returns when a shopper did not have a receipt for a gift. This practice of giving a cash card in place of cash for non-receipted returns is commonplace today with most merchants. From these early introductions, other retailers began to adapt a giftcard program to replace their gift certificate programs.

An assortment of gift cards, many from U.S. national retailers such as Best Buy, Target, and Home Depot.

A gift card may resemble a credit card or display a specific theme on a plastic card the size of a credit card. The card is identified by a specific number or code, not usually with an individual name, and thus could be used by anybody. They are backed by an on-line electronic system for authorization. Some gift cards can be reloaded by payment and can be used thus multiple times.

Cards may have a serial number, barcode, magnetic strip, which is read by an electronic credit card machine. Many cards have no value until they are sold, at which time the cashier enters the amount which the customer wishes to put on the card. This amount is rarely stored on the card but is instead noted in the merchant's database, which is cross linked to the card ID. Gift cards thus are generally not stored-value cards as used in many public transport systems or library photocopiers, where a simplified system with no network stores the value only on the card itself. To thwart counterfeiting, the data is encrypted. The magnetic strip is also often placed differently than on credit cards, so they cannot be read or written with standard equipment. Other gift cards may have a set value and need to be activated by calling a specific phone number.

Gift cards can also be individually custom tailored to meet specific needs. By adding a custom message or name on the front of the card, it can make for an individualized gift or be used as a gesture of appreciation towards an employee.

Gift cards are divided into open loop or network cards and closed loop cards. The former are issued by banks or credit card companies and can be redeemed by different merchants, the latter by a specific store or restaurant and can be only redeemed by the issuing provider. The latter, however, tend to have fewer problems with card value decay and fees.[8] Card value decay is less of an issue since the Credit Card Accountability Responsibility and Disclosure (CARD) Act was passed by the US Congress in 2009. Inactivity fees and card expirations are both limited by the new law.[9]

In either case the giver would buy the gift card and may have to pay an additional purchase or activation fee, and the recipient of the card would use the value of the card at a later transaction. A third form is the hybrid closed loop card whose issuer has bundled a number of closed loop cards; an example is free gift cards for a specific shopping mall.

Gift cards differ from scrip gift certificates, in that the latter are usually sold as a paper document with an authorized signature by a restaurant, store, or other individual establishment as a voucher for a future service; there is no electronic authorization. A gift certificate may or may not have an expiration date and generally has no administrative fees.

Bank issued gift cards may be used in lieu of checks as a way to disburse rebate funds. Some retailers use the gift card system for refunds in lieu of cash thereby assuring that the customer will spend the funds at their store.

A charity gift card allows the gift giver to make a charitable donation and the gift recipient to choose a charity that will receive the donation.

Gift cards can also be country-specific, and can be used to access USA-specific programming and media when outside the United States.

Mobile and virtual gift cards

An app store gift card display in a shop

Mobile gift cards are delivered to mobile phones via email or SMS, and phone apps allow users to carry only their cell phone.

Virtual gift cards are delivered via email to the recipient, the benefits being that they cannot be physically lost and that the consumer does not has to spend the additional time needed to buy a physical gift card in a brick and mortar store making it more convenient. Gift cards of this type can also be purchased quicker, which is especially attractive if an gifting occasion is on the horizon.

Other companies have introduced virtual gift cards that users redeem on their smartphones. As the merchant is not involved in the loop, it is considered a cash transfer rather than a traditional gift card.

Virtual Visa Gift Cards are global as they permit your recipient to in a split second believer their cash to alternate money. No long queues or confused methodology. The incredible thing about picking Virtual Visa Gift Cards is that your recipient likewise has the alternative to get a physical card instead of a virtual one. On the off chance that there is each any disarray, it can without much of a stretch be helped. In this way, the Virtual Visa Gift Card assists you in getting your rewards easily..[10]

Gift cards can have many different designs, including for, holidays, special occasions, sports teams, cartoons, and more. Some hardcore collectors collect different variations of each card, and or prefer where the pin number is not scratched off. Even more desirable are brand new unused gift cards even ones still attached to the retail backers. Most gift cards are plastic, some variances include clear plastic, shaped cards, and paperboard cards. Recently most Starbucks and Chipotle gift cards are now paperboard instead of plastic. A partial list of popular retailers with collectors who have released gift cards worldwide with many different designs and or variations include:

• Starbucks
• Walmart
• McDonald's
• Target
• K-Mart
• Barnes & Noble
• Panera
• Dunkin Donuts
• Subway
• Qdoba
• Red Robin
• IHOP
• Home Depot
• Best Buy
• Chili's
• Sears
• Toys R Us
• Perkins
• Chipotle
• JC Penney
• CVS
• Burger King
• Sonic
• Steak 'n Shake
• Krispy Kreme
• Chick-Fil-A
• Schlotzsky's
• Wendy's
• Olive Garden
• Applebee's
• Red Lobster
• Firehouse Subs
• Tim Hortons
• Dollar Tree
• Game Stop
• Jack in the Box
• In-N-Out Burger
• Aldi

It has been argued that holiday giving destroys value due to mismatching gifts.[11] The most efficient way to keep value in gifting would be to give cash; however, this is socially acceptable only within limits. Gift cards, to a degree, may overcome this problem but have certain pitfalls. Some feel that the absence of the thought of selecting a specific gift makes a gift card a worse choice than a poorly executed but individual gift.[12] New products in the gift card industry are evolving to tackle this "impersonal" pitfall of gift cards; new services launched by some service providers allows for customization and personalization of gift cards.[13]

Gift cards have been criticized for the issuers ability to set rules that are detrimental to the purchaser or card recipient. For example, gift cards may be subject to an expiry date, administrative fees, restrictions on use, and absence of adequate protection in case of fraud or loss.[2] Over time fees may render the value of a gift card zero. However, these issues have been addressed in recent years in some jurisdictions. In the United States, many jurisdictions limit or prohibit all fees or expiration dates for gift cards. Furthermore, because of the negative impact on sales that such policies can have, most merchants have adopted and even advertise a no fee, no expiration policy for their gift cards, whether or not state laws require it. In 2011, an estimated 2.5% of gift cards were subject to an expiration date and 2.7% to post sale fees.[14]

A quarter of gift card recipients still have not spent gift cards a year after receiving them, according to a Consumer Reports survey, and a majority of people say they end up spending more than the value of the card once they get to the store.[15]

In the event of the bankruptcy of the issuing retailer, the outstanding value on gift cards is considered unsecured debt, and as such gift cards may become valueless.[15] If the company intends to continue trading, gift cards may be honoured even in bankruptcy.

Another issue regarding gift cards is the growing concerns from retailers and other businesses about what can be done to prevent gift cards from being exploited by fraudsters. Gift card information can either be stolen from their rightful owners by fraudsters or they can be purchased with stolen credit card information. In recent years, cyber criminals have increased their efforts to take advantage of fraudulent gift cards as they are simple to exploit with automated brute-force bot attacks.[16] The most common form of gift card fraud is committed through the act of stealing card information for activated cards with an existing balance by attacking a retailer's systems which store gift card data. Once a gift card has been compromised, the fraudster will then check the balance through online customer portals before using the funds or reselling on the secondary gift card market.[17]

Not all gift cards are redeemed. The card may be lost, there may be time decay expiration and fees or complex rules of redemption, or the recipient may not be interested in the store that accepts the card or be under the false assumption that not using it will save money for the giver. It has been estimated that perhaps 10% of cards are not redeemed, amounting to a gain for retailers of about $8 billion in the United States in 2006.[5]

In 2012, over $100 billion in gift cards will be purchased in the United States, where over 20% of those gift cards will go unredeemed or unused. This has amassed a large opportunity in the secondary market, similar to the secondary ticket market in the early 2000s. Some companies have created a business in the secondary gift card market that allow consumers to sell their unused gift cards or buy discounted gift cards to their favorite brands. This has helped their users recoup their share of some $55 million per day that goes unredeemed in the United States every year, by turning their unused gift cards into cash.

• Rebate card
• Token money