Republished here on: 29 October 2012
As appeared in the The Economic Times on 29 Oct 2012:
By: Milan Sharma
Similar to debit cards, the pre-loaded gift cards can be used multiple times across different retailers–
Confused about what to gift someone this festive season You certainly dont want to spend time looking for something that ends up in the pile of recycled gifts.However,going the easy way by picking store vouchers can limit the choice for the other person.After all,vouchers are for onetime use and have to be redeemed for the entire amount.This is why gift cards make for a more savvy choice.These are prepaid cards,which can be loaded for a certain amount,ranging from 500-50,000.They are similar to debit cards and can be swiped at any brick-and-mortar or online store that accepts plastic.Another benefit is that you can swipe a gift card only for a partial value and use it multiple times till it is valid.
Typically,there are two kinds of gift cards in the market.A closedloop card is merchant-branded one and can only be used at a single retail store or chain,such as the ones issued by Caf Coffee Day or Fastrack.Then there is the open-loop card,which can only be issued by a bank along with a credit card company like Visa or MasterCard.These can be used across all stores.
Most gift cards are valid for a year.You can approach a store or bank directly to buy a gift card,or search for one on portals like Woohoo.in,Giftcardsindia.in,Indiaplaza.com and Infibeam.com,which will deliver it for free.Some banks also sell gift cards on their websites.
! Expiration issues
Though gifts cards can be reused,they come with a validity period.Most are valid for a year,in line with the guidelines of the Reserve Bank of India for prepaid instruments.However,some gift cards may have a shorter period,such as the merchant-branded ones from Woohoo.in, which are valid for 360 days.While validity dates are stamped on most gift cards,if yours does not have one,write the expiry date behind it with a permanent marker yourself.Some gift cards also come with the condition that they have to be swiped once in a quarter.
The biggest problem is that if the card expires and still carries some money,you will not get a refund.Take the gift card offered by the State Bank of India (SBI).If the balance in the card is below 100 and it has not been used for six months or has expired,the entire balance will be forfeited and it will be closed.However,if the balance is above 100 but the card is no longer valid,the bank transfers the remaining balance (minus 100) to the cardholders bank account if you file an application within three months of expiry.
! Renewal and top-ups
To fight fraud related to prepaid cards,the RBI has issued stringent guidelines on prepaid gift instruments.So,the maximum purchase value for both merchant-branded and bank gift cards cannot exceed 50,000,with the minimum value being 500.These cards are non-reloadable and cannot be topped up.However,you can get them reissued,though there may be a fee for this.The SBI charges 50 for reissuing a gift card,while the HDFC Bank charges 100,plus taxes,for its HDFC GiftPLus card.If you are taking a gift card from a bank,you will have to complete the know your customer (KYC) procedure.This isnt required for merchant-branded ones.
The only exception to the non-reloadable clause is HDFC Banks Mudra GiftPlus Card,which can be topped up any time but can only be used to purchase gold or silver coins at HDFC Bank branches.
! Invisible charges
Bank gift cards can be used at multiple establishments,which makes them score high on convenience,but this benefit comes at a cost as several extra charges are levied.For instance,ICICI Bank levies 200,plus taxes,if you want to check the charge slip for any fraudulent transaction.If you swipe the Union Bank of Indias gift card at a restaurant,20% of your food bill will be blocked on the card to cover any possible tip.The same is true at gas stations to cover fuel surcharge.However,if there is no tip or surcharge on the final bill,the amount will be unblocked after a few weeks.So,you need to be careful while using the card towards the fag end,because if the total amount is more than the money loaded in your card,the transaction will be declined.
On the other hand,merchant-branded gift cards do not have any extra charges.The policies of such cards are governed by the retailer.If you are a frequent customer and also have the stores loyalty card,any problems that may arise will be handled smoothly by the store.This is why 70-80 % of the gift card market is merchant-branded, says Kumar Sudarshan,director of QwikCilver,a gift card solution provider to various brands.
! Specific or general
Merchant-branded gift cards can be limiting and binding since you will only be able to use them at a particular store.If you present a gift card of a certain value of a high-end store and the giftee has to pay extra to make a purchase,the thought behind your gift diminishes.Consumers tend to spend 100-400 % more than their gift cards face value while redeeming them, says Sudarshan. This is why bank cards are preferable as gifting options since these can be used across retailers as well as for online shopping.The latter also makes more sense if you aren’t sure of the store that the other person prefers.Another advantage with a bank gift card is that you will get a tele-banking PIN and an Internet banking PIN,which will allow you to check the balance on the card as well as the transaction details.