As the world is developing, everything is getting easier including in the financial sector. Payment systems have evolved from the barter system to gold and other precious metals and then to cash, credit cards, and debit cards.
In more recent times, retailers have tried to develop alternative payment methods to ease the purchase and payment of goods and services. Some stores have developed store cards, bonus cards, and gift cards that all have their individual uses.
What Are Gift Cards?
Gift cards are a classic product of financial technology developed by creative individuals to serve as an alternative payment option at stores, restaurants, gas stations, restaurants, websites, and specific brands. It is sometimes called a gift certificate in the USA, Canada, and other North American nations, and called a gift token or gift voucher in the UK.
In simple terms, a gift card is a prepaid debit card that acts as a store of value money for a particular amount. It is used as an alternative to cash for payments of purchases at a specific store, retailer, or related business.
There are different types of gift cards but this article will be focusing on 5 and discussing their uses, but first, let us find out what you can use gift cards for and how they will benefit you as an individual and a company.
What Can I Use Gift Cards For?
Using gift cards is as great for the individual as well as it is for the company. Both the company and its customers have a lot to gain from using gift cards.
As a company, let’s see what gift cards can do to improve your business and brand;
Attract new customers
They are effective when it comes to attracting new prospects to your business because they encourage people that might not visit your business to come in and take a look around. They are normally used by businesses and stores as a marketing and promotion strategy for the recipient and entice them into buying a product from you.
For example, as much as Amazon makes sales, there are also a lot of people that are there to just “sight-see” both in their physical stores and online, but with a gift card, you will encourage many customers to look around and make some purchases and even prompt them to return for additional purchases.
Increase brand awareness
Often, the gift card of a business is designed to match the company’s logo and brand identity in colour, print, etc. So your gift card works as both a payment method and a marketing tool for increasing the brand’s awareness. People often share and exchange gift cards with family and friends and with this, your brand will be continuously dispersed among new and prospective customers.
Improve sales by selling and accepting gift cards
Even though gift cards are often set to a specific amount, most customers end up spending more than the gift card limit when shopping. Using a gift card prompts customers to begin the buying process but once they begin shopping, they will likely find more items that will cost more than the value of the gift card.
With the mindset that a fraction of the total cost is taken care of by the gift card, no matter how much or how little, most customers will proceed with the purchase, thus increasing sales for your business.
As an individual, gift cards can be useful to you in some of the following ways;
They are easy to use
Using gift cards is a simple process that comes without any hassle. They can be used as a substitute in place of cash or debit and credit cards. So gift cards offer a convenient and alternative payment option for shopping and paying bills.
Gifting for friends and family
Giving gifts brings people closer and also promotes relationships and interdependence among individuals. Gift cards can be used as a gift for holidays, like Christmas, Easter, Thanksgiving, and special occasions like a graduation, a promotion, a Birthday, and so on. Getting a gift card for a loved one creates a connection as the “it’s the thought that counts” regardless of the value.
Budgeting
You can use gift cards as a tool to plan your income and control your spending to avoid bank overdrafts. For example, assuming you want to spend $200 on groceries monthly, you can get a $200 gift card from your regular grocery store and plan your spending around that budget. Gift cards will help you save extra charges on credit and debit cards as long as you stick to the plan.
Lastly;
Since gift cards don’t require any form of identity for usage, they can be used for anonymous purchases.
What Are The 5 Types Of Gift Cards
There are 5 types of gift cards that all the individual gift cards are classified under. The first two relate to the nature of the card, explaining their limitations, while the rest relate to the physical view of the card. Let’s explain them in detail.
- Open-Loop Gift Cards
Open-loop gift cards are the direct equivalent of holding cash, in the form of credit or debit cards. They can be used at any merchant, store or website that accepts the card for all types of electronic payments. They are offered by financial institutions and credit cards issuers such as Visa, MasterCard, Discover, and American Express.
They are often connected to a checking or savings account which can be recharged continuously to give the card value. They display the issuer’s logo and sometimes the holder’s name.
Additionally, open-loop gift cars can serve as a standard prepaid debit or credit card and can be reloaded continuously by the user without much hassle. Although gift cards usually don’t have any additional charges, open-loop gift cards may require a mandatory activation fee of about $5 at the point of purchase.
- Closed-Loop Gift Cards
Closed-loop gift cards are almost the opposite of open-loop gift cards. They are marketed by individual retailers that limit the cardholder to purchasing items only from that specific retailer.
Generally, closed-loop cards can only be associated and used with a single merchant, retailer, store, or brand either in their physical stores or on their websites and online stores.
However, if a parent company owns several different merchant stores or retailers, they might issue a general gift card that can be used in any of the retail shops associated with the parent company. Like in the case of Gap Incorporation, the gift cards issued can be used in any of its affiliated stores including Banana Republic, Gap, Athleta, and Old Navy.
A closed-loop gift card can act as a form of marketing or brand awareness for the merchant because it often shows the brand logo or a part of the brand’s identity and will not show the logo or name of the financial service company that handles the intricacies of the transaction.
Unlike open-loop gift cards, closed-loop gift cards are not associated with any other accounts and often cannot be reloaded so once the value of the card is expended, it usually has no further use. They may also have an expiry date which limits the period that the card can be held without use because, upon expiration, the card will lose the remaining balance.
- Physical Gift Cards
Physical gift cards were the form of gift cards when they were first introduced in 1994 and have since remained the most popular type of gift card used across several stores and nations. Although the popularity of physical gift cards has been predicted to drop in the near future, it is still being adopted by many companies across the globe.
A physical gift card is a plastic gift card that is delivered to the buyer by post mail via any courier service company that the retailer or merchant utilizes in about 3 to 14 days. They are often available for purchase in the physical store or can be purchased online.
Oftentimes, physical gift cards can only be redeemed at the merchant’s physical store but a physical gift card that has the gift card code printed on it can be redeemed online at the website of the merchant. Physical gift cards remain the cheapest and safest form of gift cards as they are less susceptible to gift card fraud and scams.
- Digital Gift Cards
Several companies like Walmart, Target, Amazon, etc are now adapting to the digital age and embracing digital gift cards along with physical gift cards. They offer gift cards to match the need of their consumers and it acts as an incentive to increase the spending pattern of consumers and consequently, sales of the merchant.
Digital gift cards are purchased online via the merchant’s website or other third-party websites and can be redeemed online as well. Since you don’t need to go to a physical store to redeem it, digital gift cards are considered to be more convenient.
In recent times, it is being adopted by major retailers including departmental stores, restaurant chains, and even cosmetic and entertainment brands.
- Virtual Gift Cards
Virtual gift cards are nearly the same as digital gift cards. They are purchased online and are redeemable via a gift card code. Unlike digital gift cards that can be redeemed in both physical stores and online, virtual gift cards can only be redeemed online at specific
The Bottom Line
Several types of gift cards are available and being adopted based on the system that the merchant, brand, or company operates. They all have similar uses but generally are used as an alternative means of payment for the purchase of items and services in both physical stores and online. You can read our post about how to redeem amazon gift card, how to redeem google play gift card and how to redeem steam gift card
