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Gift Cards vs. Prepaid. Which Option Is More Valued?
When it comes to consumer preference and workplace rewards, gift cards far outperform prepaid credit cards. While
the two may seem similar, prepaid credit cards have a litany of associated fees. Research also shows that consumers
and businesses prefer the ease and choice of gift cards to costly prepaid credit cards.
Prepaid Credit Cards: Fees, Fees, and More Fees
In a recent article, CNNMoney found that prepaid credit cards could cost “$25 or more in purchase and shipping
fees” alone. Just buying and receiving a prepaid credit card can easily run above $25, and this ignores the much longer
list of additional fees regularly charged by prepaid credit card companies.1 These companies profit on the cards
themselves, not the merchandise purchased with the card. So tricky fees that squeeze every nickel and dime out of
consumers only add to the bottom line. Some of the fees typically charged for prepaid credit cards include:
Purchase/Activation Fees: the cost of buying a prepaid credit card. American Express charges $4.50 for a prepaid
card, while U.S. Bank Visa charges $6.95.2
Shipping Fees: many companies charge a shipping fee for prepaid credit cards bought online or over the phone.3
Maintenance Fees: also known as an “inactivity” or “dormancy” fee, companies start deducting these monthly
charges after one year that eat away at your card’s balance. For example, the Chase Visa prepaid credit card charges
a $2.50 monthly maintenance fee. In a recent survey, Bankrate found that six out of eight prepaid credit card
companies charge a maintenance fee.4
Card Replacement Fees: if a prepaid credit card is lost or stolen, many companies charge a replacement fee, which
can run anywhere from $5 to $15.5
Transaction Fees: some prepaid credit cards might even charge a fee every time you use the card!6
1
Hicken, M. “Gift Cards Charging Fees of $25 (or More).” CNNMoney, December 20, 2012. http://money.cnn.com/2012/12/20/pf/gift-card-fees/index.html
2
Hicken, M. “Gift Cards Charging Fees…” Op. cit.
3
”The Real Price of Gift Cards.” National Consumers League. http://www.nclnet.org/personal-finance/84-gift-cards/154-the-real-price-of-gift-cards
4
”Compare Gift Cards.” Bankrate. http://www.bankrate.com/finance/credit-cards/compare-gift-cards.aspx
5
Warnick, M. “How to Return, Replace a Lost or Unwanted Gift Card.” CreditCards.com, December 24, 2012. http://www.creditcards.com/creditcard-news/how-to-replace-lost-stolen-gift-card-1271.php
6
”The Real Price of Gift Cards.” Op. cit.
2013
Balance Inquiry Fees: you can be charged for checking the balance on your prepaid credit card. For example,
KeyBank MasterCard cardholders are charged $0.25 for checking their balance at an ATM.7
Expiration Date: prepaid credit cards automatically expire after five years and funds are forfeited to the company.
Prepaid credit cards used as spot bonuses may expire much sooner, even in as little as one year!8
Gift Cards Give More Bang for the Buck and Are More Popular
Gift cards aren’t plagued by the seemingly endless list of fees common to prepaid credit cards. Merchants make
profits from selling merchandise or services, not the cards themselves, so fees are very limited, if they exist at all.
Another bonus is that gift cards rarely expire, allowing recipients to redeem their gift cards whenever they choose.9
As workplace incentives, gift cards offer more advantages than prepaid credit cards. Employers can easily personalize
gift cards, transforming a spot reward into a thoughtful and meaningful gift from company leadership. And gift
cards are truly “gifts” - the card’s value is used to treat the recipient and his or her loved ones, whereas a prepaid
credit card will likely end up just paying a utility or cell phone bill. Additionally, gift cards offer recipients choice as to
how they spend their rewards. With managed gift card programs, employees are able to choose the merchants from
whom they receive gift cards.
Research shows that these advantages lead both consumers and companies to prefer gift cards over prepaid credit
cards. A 2012 survey shows that consumers purchase five gift cards to every three prepaid credit cards on average.
Since 2010, the popularity of gift cards has increased among consumers, while prepaid credit card purchases and
receipts have declined.10 A study by First Data shows that companies also prefer gift cards to prepaid credit cards.
Firms spend 20 percent of their incentives budgets on gift cards, while 14 percent goes to prepaid credit cards.11
7
”Compare Gift Cards.” Op. cit.
8
“What You Need to Know: New Rules for Gift Cards.”Board of Governors of the Federal Reserve System, 2010. http://www.federalreserve.gov/consumerinfo/wyntk_giftcards.htm
9
“The Real Price of Gift Cards.” Op. cit.
10
“Consumer Insights into the U.S. Gift Card Market: 2012.” First Data, 2012, p. 3. http://www.firstdata.com/icicimerchantservices/_images/icic/3532-Gift-Card-Insights-WP.pdf
11
“2012 First Data Prepaid Employee Incentive Card Study.” First Data, 2012, p. 3. http://www.firstdata.com/downloads/thought-leadership/
B2B_Incentive_Card_WP.pdf
2013
Figure 1: Types of Cards Purchased and Received, 2011 and 2012
Figure 1: Types of Cards Purchased and Received, 2011 and 2012
100%
90%
84%
87%
83%
86%
80%
2011
70%
2012
60%
50%
44%
42% 40%
40%
41%
30%
20%
10%
0%
Gift Cards
Prepaid Credit Cards
Gift Cards
Purchasers
Source: First Data12
Prepaid Credit Cards
Receivers
Source: First Data12
At GC Incentives™, we realize the importance of choosing incentives that are cost effective, easy to administer and
appeal to a wide variety of people. We also recognize the value of giving your recipients a reward that is memorable,
unlike cash. Our SuperCertificate® REWARD is the solution to your incentive needs…one certificate redeemable for
over 200 name brand merchant gift cards. You can even add a personal touch to your reward by adding a logo and
a custom message. Contact our Corporate Sales team today at 877.568.8401 to learn more about the products we
offer to make your next incentive program experience a memorable one!
12 "Consumer Insights into the U.S. Gift Card Market…" Op. cit., p. 3.
12
“Consumer Insights into the U.S. Gift Card Market…” Op. cit., p. 3.
2013