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Gift Cards vs. Prepaid Credit CardsWhich 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.” 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

Whitepaper | Gift Cards vs. Prepaid Credit Cards

∙ 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 a 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.

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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.html2 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-cards4 ”Compare Gift Cards.” Bankrate. http://www.bankrate.com/finance/credit-cards/compare-gift-cards.aspx5 Warnick, M. “How to Return, Replace a Lost or Unwanted Gift Card.” CreditCards.com, December 24, 2012. http://www.creditcards.com/credit- card-news/how-to-replace-lost-stolen-gift-card-1271.php6 ”The Real Price of Gift Cards.” Op. cit.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.htm9 “The Real Price of Gift Cards.” Op. cit.

Whitepaper | Gift Cards vs. Prepaid Credit 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 purchasers and receivers 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

Figure 1: Types of Cards Purchased and Received, 2011 and 2012

100%

0%

50%

Purchasers

25%

75%

Receivers

84% 87%

42% 40%

83% 86%

41%44%

Gift Cards Prepaid Credit Cards Gift Cards Prepaid Credit Cards

Source: First Data12

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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.pdf11 “2012 First Data Prepaid Employee Incentive Card Study.” First Data, 2012, p. 3. http://www.firstdata.com/downloads/thought-leadership/B2B_Incentive_Card_WP.pdf12 “Consumer Insights into the U.S. Gift Card Market…” Op. cit., p. 3

HeadquartersGiftCertificates.com11510 Blondo StreetOmaha, NE 68164

Corporate Sales SupportPhone: 877-737-0200

©2014 GiftCertificates.com Corporation. All rights reserved. | GC Incentives, SuperCertificate, e-SuperCertificate and Greeting Card SuperCertificate are either registered trademarks or trademarks of GiftCertificates.com Corporation in the United States and/or other countries. All other trademarks are the property of their respective owners. Participating merchants subject to change. All gift cards are subject to individual merchant terms and conditions.

GC Incentives™ builds corporate incentive, promotion and reward programs that achieve results. Our incentive management system, IncentCore, makes it easy to implement, administer and take the guesswork out of your rewards program. More than 30,000 organizations, from industries like, energy, finance, insurance, manufacturing and healthcare have already partnered with GC Incentives, including many Fortune 1000 companies. We offer an extensive product portfolio including our SuperCertificate® REWARD, which is redeemable for over 200 nationwide merchant gift cards.

GC Incentives™ is the business-to-business division of GiftCertificates.com™. Established in 1997, GiftCertificates.com is a privately held corporation headquartered in Omaha, Nebraska. Learn more at www.gcincentives.com.

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Choice is a powerful motivator

We know everyone likes choices. At GC Incentives™, our approach to incentives and rewards is defined by creating a memorable experience. Our products prove that choice is a powerful motivator to support your corporate culture, reward performance, increase sales, celebrate milestones, show appreciation and more. SuperCertificate® REWARDS appeal to everyone in a diverse workforce. Your employees can redeem their SuperCertificate® REWARD for one gift card or a combination of gift cards of their choice from our list of more than 200 nationwide merchants, including popular stores, airlines, hotels, theaters and restaurants.