Nonbank Gift Cards Deserving No Degree of Credit. Why?

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Let's first specify what type gift card we are discussing. There are two basic types functioning on the market today - those gift cards that are available with banks and carry Visa or MasterCard logo and those that are issued by retailers.

We are focusing on nonbank gift cards as very soon they could lose their value and become just worthless pieces of plastic. The major reason for their depreciation is going out of business or filing for bankruptcy among retailers. There is already a large group of cardholders suffering from the bankrupt retailer the Sharper Image that has declared suspending the acceptance of its gift plastics.

The customers' frustration is easy to understand. You put, say $100 on the card, add to it the set up fee and others, and now you just cannot use it! The money has left your wallet and rested on the retailer's account.

However, though it is the gift card holders who suffer most, the suspending of card acceptance seems to be a double-edged sword. The retailer is not only undergoing bankruptcy but is risking losing its loyal customers who are very likely to turn to another, prosperous retailer.

The suspension approach has given consumer-advocacy groups another moral right to become more aggressive against some of the rules applicable to gift cards.

As it is, nonbank cards do not comply with the jurisdiction of the federal banking laws, so the retailers issuing them have their own vision how to account for the revenues, disclosures and regulations associated with them. Hence, there come all those numerous fees, expiration dates and other restrictions that make the use of a gift card less profitable for the customer.

Now, as many gift cards threaten to lose value, more consumers think of applying for a regular credit card because it usually appears to be of greater profit. Why? It is simple. You only need to make on time payments and stick to the credit line and you are sure to be gaining profit, let alone enjoying the purchasing power which is a regular feature with a credit card.

So, are the developments in the retailers' cards business making you question your further loyalty? According to the recent poll, they are. Consumers are afraid that retailers may be sold through chapter 11 of Bankruptcy and their gift cards will lose value for ever. So, they have to variant to react and protect themselves - go to another retailer or go to a bank for its own gift card or a credit card which is a more lucrative deal, considering some of its terms, rates and fees.

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