All You Wanted to Know about Gift Cards To Improve Customer Relations

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Paper gift certificates are now a thing of the past. Everyone in modern society is now familiar with the gift card. It is an alternative to a credit card. Gift cards are widely popular in the United States. Each year it has been estimated that 93% of consumers either purchase or receive a gift card. There are a lot of benefits when a business implements a gift card program and sell gift cards to its consumers. However, caution is needed to avoid fraud issues when selling gift cards. These will be discussed shortly, including the laws one needs to be aware of.

Sell Gift Cards and Benefit in these Various Ways

Gift cards provide a business with numerous ways to encourage additional sales. According to credit card processors, an estimated $13 billion was loaded into gift cards in the year 2015 and a typical customer visited a store more than 3 times just to redeem their gift card. Additionally, estimates show that 72% of customers will spend more at a store than the actual value of the card. This can be even up to 20 times more. By offering gift cards, you encourage larger sales much more than the customer would otherwise make.

There are a variety of gift giving occasions such as holidays, graduations, birthdays and anniversaries. A large percentage of corporations also use gift cards as employee incentives. You can take advantage of these markets by offering gift cards.

You can also consider a policy to refund purchases that are not accompanied by a receipt onto a gift card. This encourages the customer to choose a different item in order to prevent that lost sale.

Types of Gift Cards

  1. Closed loop: these types of cards can only be used at your store
  2. Open loop: these can be used at multiple businesses unless there is a specific restriction. Open loop gift cards re often co-branded with a specific card network like Visa. Hence, they can be used at any location where Visa is accepted.

Although many retailers sell gift cards that are closed loop, there are some who will offer both types to reach all customers.

In addition to physical cards, many retailers are now offering digital cards. These have a code that can be checked out on your website, making it convenient for customers to make purchases without having to physically come to your store. Even if you have a brick an mortar location, you can start offering digital gift cards. However, be wary of the risks of fraud as discussed below

Gift Cards and Fraud

Gift cards are the main target for fraud. Thieves will simply steal the physical gift cards while more advanced thieves will clone cards or hack digital cards and use the numbers. Additionally, there are scammers who will go the extent of using stolen credit card information to buy gift cards online. This makes it even more difficult to trace the succeeding purchases.

Fortunately, you can protect yourself from fraudsters if you take certain steps. If you are using physical cards, use a program that is activated through registration or POS system. This ensures that even if a thief succeeds at stealing the cards form a counter display, he will not use them. Allow gift cards to be purchased by cash only.

For online gift cards, you can implement anti-fraud tools such as the 3D Secure technology which requires a consumer to key in a pass code when they are purchasing. There is also the country restriction mode which can help you avoid purchase form where countries with known fraud are flagged.

Gift Card Laws

The sales and redemption is still a financial transaction and is therefore subject to state and federal laws. Here are some guidelines:

  • Activation fees are allowed but you have to disclose the fee before purchase
  • There has to be no card activity for at least 12 months for inactivity fees to apply
  • After the 12 months, inactivity fees are charged once a month
  • Gift cards cannot expire for at least 5 years. You need to reveal the expiry date before purchase

Ensure you have consulted your processor, gift card program provider or a licensed attorney to receive specific legal advice in regards to selling or redeeming gift cards.

How to Start a Gift Card Program

Although it might seem intimidating, starting your own gift card program is easy if you take advantage of the plenty of services available to make the process quick and painless. If you already accept credit cards, you may talk to your processor about the program.Processors will generally offer closed loop gift cards that can only be redeemed at your business.

There are some companies that will offer signage and display racks in an attempt to draw attention to your gift cards and thereby promote huge sales. A credit card processor will help you get up and running with the program in just a few business days. However, it is better to start well in advance before the arrival of the major gift giving occasions such as graduations. The closer these days approach, the more orders businesses will be placing for gift cards with processors.

Universal Gift Card Programs

You have other options if your processor does not offer gift cards. You can work with universal gift card program companies if you prefer to use unaffiliated services. These programs have the same option just like the processor-based programs. Double check for compatibly with your specific processor before you commit to any program.

There is more flexibility when you use a universal program. You will be able to find lower costs per card and there are more design choices to choose from.

The cost of your gift card program will depend on the company you work for. Many processors have no set up fees. The cost mainly is seen when purchasing the cards themselves.

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