I was a gift card virgin – until recently. Now, I will not use them anymore. Number one – they aren’t worth the trouble. Number two – they aren’t worth their full face value. There’s hidden info that consumers don’t know about until they try to use them, which brings me to number three – they’re aggravating!
What sounds like a convenience at first isn’t what it’s cracked up to be. My hubby and I had dinner with friends Saturday night at a lovely local restaurant. Live jazz, great food, nice ambience. OK, I’ll mention the name. Bobby’s in Scottsdale. Very cool place.
I had cashed in my remaining Aeroplan miles (Air Canada) when I relocated to the U.S. Because the selection was limited in the States, I opted for a $100 CDN American Express dining gift card. It expires next week, so we decided to make it a special night to celebrate life – in spite of the crummy economy.
Add to that, two Norton Symantec rebate VISA gift cards for purchasing Norton 360. One was for $35, the other for $20 (USD). Sounds simple enough. Split the bill in half and use our cards until our share was zero. Yah, sure.
The restaurant’s processing company rejected all three cards! The manager was very apologetic. And the owner was very sympathetic when I called to inquire. Seems they have problems with gift cards in general. And guess what? They’re not alone. Restaurants are especially vulnerable to gift-card problems because the issuers automatically add a 15-20% gratuity. When they ran through $30 on my $35 VISA gift card, it was rejected. Seems these card companies aren’t communicating adequately with the restaurants when the gratuity fee rises from 15% to 20%!
Although my evening out ended with me being ticked off, I can’t fault the restaurant. They’re victims, too.
Plus, every time a consumer uses a card in a retail environment, they lose a dollar for the transaction fee. Want to use your $50 gift card at the grocery store? Tell the cashier to put it through for $49. Aha. Just a minor detail.
And gift cards are big business. The National Retailers Federation estimates that consumers
spent $26.3 billion on gift cards last Christmas season. Yikes.
According to a 2007 Consumer Reports article, “… a card is one gift that can keep on giving – grief. That’s especially true for bank-issued cards, which often saddle recipients with fees, expiration dates, and other gotchas.”
“A national survey of 1,500 consumers done last spring by WSL Strategic Retail, based in New York, found gift-card fees and expiration dates were among the top causes of frustration. And that’s just among people who attempted to use them. Earlier this year, TowerGroup, a research firm in Needham, Mass., estimated the value of unused gift cards in the U.S. at $8 billion for 2006. And in its fiscal 2006 annual report, the retailer Best Buy revealed a $43 million gain from gift cards that were unlikely to be used.”
So what does this teach us from a marketing perspective? Read the fine print? So much for the new transparency and authentic marketing practices we’re supposed to see these days.
What about you? Has this ever happened to you? What did you do about it? Do you buy gift cards?
Tags: Aeroplan, American Express, Bobby's, fees, gift cards, VISA
The biggest issue with gifts cards are the hidden fees or diminishing value ones. Typically this is an issue when using “spend anywhere” cards like the AMEX one you used.
Its less of an issue when using store specific cards- those are most often the easiest, don’t have a hidden fee, and often cannot diminish in value or expire. I know in MA, there are some state laws regarding this. Its a case of “buyer beware”. Know what you are really buying before giving them out.
Our department won some sales contests last summer and were given several of these AMEX cards. We took he whole dept out to dinner and tried to use them at a resturant. We had the same problem you did. It was very frustrating as the receipiant. My manager voiced her concerns to the marketing dept that ran the contest.
Elaine,
The gift cards you discuss are in my mind better described as reward cards, as they are only usable with a credit card and are given as a reward for purchase of something. They are very atypical of the normal gift card.
Gift Cards are mostly purchased from retailers, including restaurants, or used in marketing efforts by retailers as offers. I am working with a restaurant currently, and we have distributed more than 2000 gift cards. You bring them to the restaurant, and they are worth exactly their value stated. No hassles, no frustrations and no confusion.
On the other hand, rewards and rebates are always a hassle, and I just experienced that very thing when I purchased a new printer at Staples. It took three visits before I could finally register for a $50 rebate for recycling my old printer.
Melissa, thanks for the info on store cards. I remember now that Aeroplan also sent me a $100 Macys card last year and I didn’t have any problems with that one. It was worth its full face value.
Lewis, thanks for the lesson on the difference between gift and reward cards. I didn’t know there were two kinds. There seems to be a misconception out there, as most people I’ve discussed this with refer to them all as “gift” cards.
In the case of the AMEX card, I cashed in my Aeroplan miles for the “dining” card. It’s the automatic tip that throws everyone off. If the card were worth its face value and could be used like any other credit card, then the system would work just fine. They should allow restaurant patrons to tip as they usually would and not force a specific amount on them automatically. As it stands now, restaurant staff must estimate the fees and tips before swiping these cards. How ridiculous is that? The onus should not be placed on them.
The VISA cards came as a rebate from Norton Symantec for a software purchase. I had expected a check, but instead, two cards arrived. Again, the staff person who swipes these cards must also account for fees and tips when used in a restaurant. So, on top of waiting forever for rebates, these cards add another layer of frustration.
You’d think that Corporate America would realize that ticking off the customer is not in their best interest.
Elaine, this statistic says it all, “The National Retailers Federation estimates that consumers spent $26.3 billion on gift cards last Christmas season.” It’s a big, big business and a very lucrative one. That said, you are right in that consumers need to better educate themselves on +/- of gift cards, and companies that offer them to their customers might be well served to highlight potential pitfalls.
Thanks, Paul. You’re right. For those companies that want to ensure their customers are happy, they should be transparent and include instructions in an easy-to-find location.
I just learned last week that a $50 Visa Vanilla spend anywhere gift card was only valued at $25 after monthly “maintenance” fees had been deducted. I’ll never buy one again and if I receive one, I’ll make sure I spend it immediately rather than save it for a special occasion like the dinner my wife and I tried to pay for with this gift card.
That’s just nasty, Peter!
I have received gift cards as a rebate from my mobile phone service provider. I found out that the local CVS drug store knows how to process them, so I used them there. However, I try never to make a purchase that comes with a rebate like this, just because they are so aggravating to try to use!
Gift Cards seems to be a catch all term and that’s a problem.
I purchase Gift Cards from a national fundraising organization that allows my non profit club to earn discounts, at the time of card purchase, of 1% to 15% of the cards’ face value. I have access to Gift Cards from over 200 national retailers.
I also purchase Gift Cards locally as a club fundraiser and the club earns an instant credit of 5% for groceries, gas and liquor purchases at a local grocery co-operative chain. It really adds up for our club and we allow our athletes to fundraise with these cards as well.
The best part is that it’s money I am going to spend anyways. I use cards for groceries, gas, clothing, restaurants, air travel and more. I can use the cards just like cash and can take advantage of any affinity programs or promotional pricing to save even more money.
Yes, I am careful when I buy the cards. I buy from big retailers that I know are stable. I have never had trouble using the cards in the 3 years that I have purchased them. I order cards about once a month but I could order more often if I needed. I plan my big purchases and buy Gift Cards in advance.
It should be noted that not everyone is a good candidate for Gift Card use. You have to be disciplined and organized. If you lose the card or leave your cards at home they are going to cost you money.
I feel like I am missing an opportunity if I don’t use a Gift Card for a purchase. It’s a fundraiser that really works for my club. So, I am a bit sensitive when Gift Cards get a bad rap. I could sell a lot more Gift Cards to friends but the ongoing bad press has people afraid to use them.
Add to that the fact that something crazy like 20-30% of the cards aren’t used, lost, or expire, and you’ve got a very good business model indeed.
Add to that the fact that something crazy like 20-30% of the cards aren’t used, lost, or expire, and you’ve got a very good business model indeed.
Great article. I totally agree, gift cards are not doing any good for the consumer. Yeah it’s an easy gift, but nothing more. Huge hidden fees from hungry business and problems using the card. Anyway, studies shows that a lot of gift cards are not even used before they expire, they are the emitters best friends! Great food for though to read your article!