Prepaid cards vs gift cards

Rowan —  December 12, 2012 — Leave a comment

giftcard-for-christmas-Small

Although it may not feel like a very personal gift, you probably can’t go wrong giving a gift card as a holiday present. Gift cards and cash are the top two gifts consumers want to receive this holiday season, according to the Deloitte annual holiday survey. As prepaid cards continue to grow in popularity, sometimes as an alternative to a checking account and sometimes as a type of gift card.

Is one better than the other? Here we describe the differences so you can decide.

For purposes of this article, prepaid cards refers to reloadable prepaid cards — and not to cards that are marketed as a way to give someone a specific amount of money as a gift.

Flexibility:

Gift cards: Cards that are associated with a particular retailer can, of course, only be used to make purchases at that retail store. Depending on the retailer, though, it may be possible to use a gift card for one store to purchase a gift card to another retailer, though that’s not always possible. If you’ve received gift cards you don’t plan to use, you can sell them on gift card exchange sites, or exchange them for a card you prefer. Not sure which store your gift recipient prefers? Consider a mall-wide card, or a card that carries the logo of one of the major card issuers, so that the person who gets the card can can shop at all the stores in the mall or wherever he or she wants.

Prepaid cards: These cards are very flexible since they can be accepted anywhere that particular brand of card — MasterCard, Visa, or American Express — is accepted.

Lost or Stolen Cards:

Gift cards: If you lose a retail gift card, you may be out of luck unless you can prove to the merchant that you purchased the card, or report the loss or theft before the balance is used. If you registered the gift card through the merchant when you received it, then the first problem is taken care of, and as long as the card hasn’t been used you should be able to get the card canceled and a new one reissued. (Individual retailers may set their own policies.

Prepaid cards: You may have more protection here than with retail gift cards. Certain programs generally mean that cardholders aren’t responsible for fraudulent purchases as long as the loss or theft is reported promptly. However, there are some exceptions; for example, Visa purchases made with a PIN and not processed on the Visa network.

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