GIFT CARDS: ALL INS AND OUTS YOU NEED TO KNOW

Everyone sometimes gives or receives them as a gift, the gift card. But what do we actually know about gift cards? In this blog we will explain the best known type of gift cards that occur in NL and what the pros and cons are.

WHAT IS A GIFT CARD?

It is useful to have a clear idea of what we mean by a gift card. Other names for gift cards include gift card and gift card. A gift voucher is a security that the recipient can spend based on his own wishes. The gift card represents a predetermined amount with almost the same function as regular money, namely as a medium of exchange. Gift cards can be spent with one specific retailer, a group of retailers or on the basis of a payment network such as Mastercard.

THE MOST COMMON TYPE OF GIFT CARDS

Gift cards are often similar in that they are plastic with the size of a bank card. Nevertheless, the gift card can be divided into different types, namely gift cards for a closed network (closed loop), a limited network (restricted loop) and an open network (open loop). We want to give you a good idea of what these variants mean by explaining them below.

CLOSED LOOP GIFT CARDS

Most gift certificates for shops or department stores are “closed loop” and are also called Retail gift cards. This means that the shop that issues the card is also the party that cashes the card. You cannot spend the credit or credits on the gift card anywhere else than at that specific retailer. Examples of closed network gift cards are the Coolblue gift voucher or the iTunes gift card. You can only use the gift cards at Coolblue or the App Store.

WHY SHOULD YOU BUY A CLOSED LOOP GIFT CARD?

Do you know exactly what the recipient likes or where he or she likes to shop? Then gift cards from a specific (web) store are definitely recommended. In that case you do not have to doubt whether the voucher will be spent well. In addition, gift cards from stores usually have no additional activation costs. This means that you only pay the amount that actually represents the credit on the gift card. The Retailers usually do not charge any additional costs for these gift cards because they earn money from the products and / or services that are purchased when redeeming. In many cases, the purchase amount is higher than the value of the gift card. Because of this, there is sometimes even an option to purchase gift cards at a discount.

WHAT SHOULD YOU PAY ATTENTION TO WITH CLOSED LOOP GIFT CARDS?

You need to spend these gift cards at a specific store, so there is a chance that you cannot or do not want to redeem the voucher. For example, you may have received a gift voucher from a Retailer whose products or service you do not like. Or you do not see an opportunity to exchange the gift card because there is no drop-off point nearby. In such a case, you can choose to sell the gift card (online) or pass it on at a subsequent opportunity. A major risk with Retail gift cards is that the funds are rarely guaranteed. This means that gift cards are usually no longer accepted in the event of (impending) bankruptcy. The gift voucher is then worthless.

RESTRICTED LOOP GIFT CARDS

Restricted Loop gift cards are gift cards that you can redeem at a network of affiliated branches, shops, restaurants, etc. These gift cards are issued by an organization that maintains the network. The VVV gift card is a good example of this. Although widely accepted, the Retailer must be affiliated with the concept of accepting the card. It is therefore not often that these types of gift vouchers can be used internationally. The GiftForYou Gift Card is, among other things, a gift card that can be spent in Germany or Belgium.

WHY SHOULD YOU BUY A RESTRICTED LOOP GIFT CARD?

Do you know of the recipient that he or she likes to eat out, read or love fashion, then gift vouchers for a specific industry or selection chains are a good solution. The number of return points can vary from just 10 to sometimes 20,000+ acceptors for this type of gift card. Because the voucher can be used for a leisure activity or hobby, you often know for sure that the voucher will be used well.

Resticted loop gift cards (usually) have no additional activation costs as the receiving Retailer must pay a commission for redemption. This means that you only pay the amount that actually represents the credit on the gift card. Restricted loop gift cards have a limited risk because some variants have an EGI quality mark, which guarantees the credits.

WHAT SHOULD YOU PAY ATTENTION TO WITH RESTRICTED LOOP GIFT CARDS?

Although some variants have many physical stores that accept the card, online acceptance is often very limited. This is because each website or payment provider must have separate integration with the gift card system for acceptance.

Furthermore, you can the limited number of return points lead with some regularity (although suffering is sometimes appropriate here) to find acceptors of this type of gift voucher. For example, acceptors may not be listed on the gift voucher site or may have recently discontinued it. It is advisable to read in advance where you can hand in the received gift voucher.

Depending on the type of gift card, acceptors may sometimes have to pay up to 20% commission. As a result, restrictions / conditions may be imposed on the gift card holder by the merchant. It is also recommended to pay close attention to whether the gift voucher is related to the season. This is because these types of gift cards have a very short period of validity.

OPEN LOOP GIFT CARDS

Open loop gift cards (also known as cash cards) are relatively new to the Dutch market, but they are the most widely available of all existing types and brands of gift cards. This is because payments are made via Mastercard’s worldwide payment network. In addition to Mastercard gift cards, there are also variants of Visa and American Express. The credit of the gift card is in an assigned account with the issuing bank, so the balance is always guaranteed. Because payments are made via the Mastercard payment network, the gift cards can also be used online worldwide to make purchases. Almost all major retailers, restaurants, hotels, etc. accept Mastercard, making these gift cards almost as flexible as your bank card.

WHY SHOULD YOU BUY OPEN LOOP GIFT CARDS?

Does the recipient have very broad interests? From shopping, online gaming to city hopping abroad, an Open loop gift card is definitely the best option. You give the recipient ultimate freedom where, when and to which the credit is spent. In addition, the credit is safe in case of loss of the card, you can easily transfer the balance to a new card in such a case. As a cardholder you are also protected against fraud when a (web) store does not deliver the ordered products after payment. It is then possible to recover the purchase amount via a chargeback. Naturally, these types of gift cards are also ideal for your own use. Do you want to make a one-time online purchase, but do not have a credit card? You can perfectly use an Open loop gift card as a “disposable” credit card. Once the transaction has been completed, you can simply throw the gift card away.

What should you pay attention to with an open loop gift card?

Open loop gift cards usually charge activation costs as the gift voucher company (including bank and processor) earns money from this. There is no money to be made from the credit, such as margin with Closed loop gift card or commission with Restricted loop gift cards. You can think of the activation fee as a small price for the ultimate spending freedom.

As mentioned earlier, Open loop gift cards are relatively new. It is therefore possible that store employees are not familiar with the product, so they sometimes refuse the gift card. We recommend that you inform the employee that if they accept Mastercard or Visa, they also accept open-loop gift card payments. As these gift vouchers become better known, this problem will disappear.

Furthermore, it may sometimes be that webshops have indicated that they accept Mastercard (or Visa) as a payment method, but that the gift card is nevertheless refused. The cause of this is often incorrectly entered card details. In addition, there are also sites that only accept Mastercard Secure payments. The site then only accepts Mastercard payments if the card can be verified by a (pin) code. Usually Open loop gift cards do not offer this option, which means that payments are declined. You can solve this by linking the card to your PayPal account. During this link, the card is verified by PayPal, after which you can use the card at the relevant site. At check-out, choose PayPal as the payment method and then select your card to have the amount debited.

WHICH GIFT CARD IS THE BEST?

The choice for the best gift card depends on the wishes (of the recipient). Open loop gift cards from Mastercard are ideal if the recipient does not know what he or she wants, because it gives you a very wide range of online and in-store spending options. Closed loop gift cards may be a good option if you are familiar with the wishes or hobbies of the recipient. Chances are that the recipient will spend the gift voucher with pleasure. Restricted loop gift cards are a good interim solution in case you know what the recipient wants, but do not want to send completely to one specific retail chain.

Whichever gift voucher you choose, always consider which voucher is the easiest for the recipient to redeem – whether that is a gift voucher for a local restaurant or a Mastercard gift card that can be used anywhere. As long as the gift card can be easily used, use will be a positive experience for everyone involved.