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What is Gift Card?
A Gift Card looks and works like a Debit Card, but it is preloaded with a certain amount of money by the one who gifts it. The receiver of the Gift Card can then spend the prepaid amount on a number of electronic payment purchases made online or in retail shops.
Pros of Gift Cards
Gift cards can offer a number of advantages. For example:
They can be a good substitute form of payment if you’d rather not pay cash or use a credit card.
Gift cards can be an appropriate gift for the holidays or any other special occasion.
You can use gift cards to control spending (helpful for avoiding bank overdrafts).
They can be easy and convenient to use.
Note: While prepaid gift cards can be stolen or lost, just like a debit card or credit card, there is some good news: The 2009 Credit Card Accountability Responsibility and Disclosure (CARD) Act offers protection to gift cards issued by retailers and banks. (7)
Cons of Gift Cards
Gift cards can also have some downsides. Here are five.
After purchases are made with a gift card, there may be a small amount of money left, which if not used, whether due to forgetfulness or inertia, ends up as money wasted.
You may pay purchase or reload fees to add money.
Closed-loop cards limit purchasing power.
Losing a gift card or having it stolen can be a headache, especially if you have failed to register it or keep the gift card number.(6)
You could be charged an inactivity fee if you fail to use your card.
