What Are the Pros and Cons of Gift Cards?

Almost all retailers provide gift cards, which let consumers spend or give money to loved ones. There are two types of gift cards: digital (sometimes called e-gift cards) and physical. Each type offers a number of benefits and features.

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If you’re considering purchasing gift cards for yourself or as presents for loved ones this Christmas, on their birthday, or for any other occasion, it’s useful to know how they compare to other payment methods.

Guide For Using A Gift Card

Many businesses, including restaurants, retail stores, and gas stations, accept gift cards as payment. These cards are also known as stored value cards. You load money onto the card, which may then be used at approved retailers by you or the gift card recipient.

Both closed- and open-loop gift cards are offered. Wherever that particular brand of card is accepted, you may use an open-loop gift card. For example, you might use a gift card with the Visa logo to make purchases anywhere Visa is accepted.

Conversely, a closed-loop card is limited to usage at specified businesses. For instance, a gift card purchased from Amazon or Starbucks is only redeemable by the buyer or the receiver for purchases made at the issuing retailer. Hybrid cards, which allow you to use a gift card at a few of linked stores but aren’t accepted elsewhere, are a compromise substitute.

Digital gift cards as opposed to real ones

Both digital and physical present cards—that is, plastic cards—are possible. Digital gift cards aren’t physical; instead, they’re an exclusive code that may be used to buy things at internet retailers. Physical cards are still the most popular kind of gift cards, which may be explained by the fact that gift-card donors think that physical cards adhere more to social standards than digital ones, according to a new research published in Psychology & Marketing.

Consumers may purchase physical cards from merchants like Amazon, Walmart, and Target in addition to loading digital or online accounts. Big-name restaurants like Chipotle, Starbucks, and Chili’s also give their customers digital and physical gift cards. Using an in-store card reader or an app, customers can pay for their food and drinks more rapidly at the register by using these cards.

Codes for digital gift cards can also be stored in a mobile wallet app such as PayPal’s Venmo or Google Pay or Apple Pay. When it’s time to check out, you may then select your digital gift card as your chosen method of payment.

Benefits of Gift Cards

Gift cards are associated with various advantages. As an example:

If you would prefer not to use a credit card or pay with cash, they can be a good alternate mode of payment.

Gift cards are a perfect present for any special event, including the holidays.

When it comes to budgeting and avoiding bank overdrafts, gift cards are a great resource.

They can be easy and practical to use.

When it comes to buying presents, if you’re not sure what to purchase someone on your list, gift cards might be a better alternative because they enable the recipient buy anything they want, anytime they want. Additionally, keep in mind that choosing closed-loop gift cards over open-loop ones may limit the recipient’s options for how to use the cards.

Drawbacks of Gift Cards

Present cards may have significant negatives as well. Here is a list of these five.

After using a gift card to make purchases, there may be some money left over; if this money is squandered, it might be due to forgetfulness or laziness.

You can pay purchase or reload fees to add money.

Closed-loop cards restrict the amount of purchase power.

It may be incredibly unpleasant to lose or have a gift card stolen, particularly if you didn’t register it or keep the gift card information.

You can be charged an inactivity fee if, within a year of your purchase, you do not use your card.