Gift cards have become a popular alternative to presents because they are safer than cash and ideal for individuals who prefer to choose their own gifts. Many consider store gift cards, which can only be used at a designated retailer, to be low-fee and easily replaceable alternatives. Bank-issued gift cards, however, carry slightly higher fees but can be used at a number of locations.
The study, conducted by NerdWallet, of the 17 most popular store gift cards, nine bank gift cards and 70 prepaid debit cards found that store gift cards are not guaranteed to be replaceable if lost or stolen.
Eighteen percent of stores would not replace or refund the card balance if lost or stolen and even more retailers required a proof of purchase to receive a refund. Additionally, while some store cards are offered with free shipping, 29 percent of cards carried a shipping fee in order for the customer to receive a physical gift card.
While bank cards may provide enhanced security, 100 percent of cards surveyed charge purchase fees. Approximately 70 percent of bank-issued cards charge an inactivity fee if there is no activity on the card after one year. All bank cards are replaceable if lost or stolen, but 33 percent would charge a fee averaging just more than $3.
Poorly chosen prepaid debit cards may be the most problematic, with 82 percent of all prepaid cards surveyed charging an activation fee or monthly fee, averaging $8.29 and $6.26 respectively. Sixty-one percent charged an average replacement fee of $7.92, and 31 percent charged a fee for each PIN transaction made with the card.
Well-chosen prepaid cards, however, offer a number of benefits. Some prepaid cards carry no monthly, purchase or replacement fees and are more versatile and secure, offering a less expensive alternative to traditional gift cards.