Once the card is approved, it is produced and mailed to the intended recipient. The recipient will activate the card, typically either by phone or online. Whenever the card is swiped, the processor confirms the card has a high enough balance to cover the transaction.
It then checks a merchant identifier that tags along with the transaction, to ensure that there are no restrictions on the card being used at the location it was swiped. If everything clears, it will deduct the total of the transaction from the balance from the card and send it to the merchant.
Closed loop cards are a little more nuanced. Generally, they operate with a magnetic stripe, like a credit card, although smaller businesses might opt for a card that they can scan in with a bar code. Most modern POS systems are equipped so that any merchant can set-up a closed loop system and process the cards using the same technology, but some systems require a different piece of technology, such as a separate scanner, in order to work.
So, there you have it; the ins-and-outs of how gift cards work. For a consumer, gift cards, especially open loop cards, offer an easy and convenient way to shop at businesses they love. There can be some painful moments — having to pay inside at a gas station, for example — but with a little preparation, those snafus can be easily avoided.
Remember when, in order to get a gift certificate, you had to go to that particular store and some poor clerk would fill it out by hand? Shelley Hunter, a former product analyst who now writes for giftcards.
It was basically a fraud-prevention measure. So how did their different cards end up in a gift card mall like the one John Jenkins was so fond of at Target?
A third-party broker. Two major companies, Blackhawk Networks and InComm , manage and distribute many of these gift card malls in the United States. Teri Llach, chief marketing officer at Blackhawk, said the business took off about 15 years ago and now their business takes care of the whole process.
Brands pay Blackhawk to get in the gift card mall, and Blackhawk passes some of that money onto the stores that host the mall. Blackhawk also acts as the go-between for the brands and the retailers on what to include or not. Sites like Cardpool. Here are some helpful tips on how to get the most cash for your unwanted gift cards.
Time limits used to be a problem for consumers; oftentimes gift cards would have short expiration dates, like 12 months or less. As of , however, cards cannot expire within five years of the date they were activated and inactivity fees are more limited, except in certain circumstances, per the Federal Trade Commission. Still, there are other fees associated with some of these cards, including transaction or balance inquiry fees, which can eat up your credit.
Know the terms for your particular card so you don't miss out on every cent you deserve. Consumers are 2. Like credit cards, gift cards make shoppers feel slightly less attached to the transaction "it's not real money! The problem is accentuated when the merchant penalizes the buyer of the discount gift card by reducing previously earned rewards. When they called the company to complain, the company said that the gift cards added to their accounts had already been linked to other accounts assumed the cards had been stolen.
To my knowledge, the company refused to reinstate the lost stars. Requiring customers to register their gift cards in this way is one way companies can block their cards from landing on the secondary gift card market. While many resellers may still buy gift cards that can be registered to merchant accounts e. Rather than fight the merchants, some gift card resellers are trying to partner with them to buy gift cards in bulk at a discount and offer those cards to buyers at a slightly higher price.
Not every merchant is agreeable to the arrangement, but those that are should see an increase in foot traffic from motivated shoppers. I only buy discount gift cards with intent to make a purchase.
The person who sells the gift card is the one who accepts less than face value for a card. But even the most carefully selected gift card can sometimes be inconvenient to use. So how can you buy and sell gift cards on the secondary market without running into the problems described above? Below are tips on how to protect yourself when buying a discount gift card:.
Buy from a Reputable Reseller. Though it may be tempting to purchase discount gift cards from individuals and the discounts offered may even be surprisingly high remember that Apple employee?! Since they guarantee their sales, these companies are also more likely to have a security team in place to detect and deter fraud schemes from affecting their customers.
Check Balances Immediately. Check the balance of the gift cards you buy immediately to be sure the value received matches the purchase receipt. If there is any discrepancy, report the problem right away. Use Discount Gift Cards Quickly. Plus some gift card fraud make take a few days to materialize or be detected. When I buy discount gift cards, I know that fraud is a small but realistic possibility. If there is a problem with the gift card, he or she may not be comfortable letting you know and the money spent could go to waste.
Despite the problems listed above, I have never had a problem using a discount gift card. As a mom on a budget, I need to take advantage of discounts wherever I can get them—and unwanted gift cards create the perfect opportunity. Over time, I expect trusted gift card resellers will reduce the amount of fraud currently attributed to the secondary gift card market if not eliminate it entirely on their respective sites.
What do you think? Is it possible to make both merchants and resellers happy? Let me know in the comments below or reach out to me on Twitter GCGirlfriend. The Giftcards.
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