Gift cards and other prepaid cards may be a better gift than cash, according to consumer reports, but the publication has confused general purpose reloadable cards with open-loop gift cards.
It gives the following advice for closed-loop gift cards:
Don’t give a merchant gift card unless you’re certain the intended recipient really loves the store. Almost one billion dollars in gift cards went unspent 2015, according to the market research firm CEB.
But when it comes to open-loop prepaid for gifting, the recommendations go off the rails.
Three cards stood out in our ratings: Bluebird by American Express and Walmart, Chase Liquid Visa, and Green Dot Prepaid Visa. They were highly rated for safety (insured by the Federal Deposit Insurance Corporation), fee accessibility, and clarity. They also rated well for value (low fees).
The cards listed there are not designed to be gift cards. They are designed to provide financial services to people who want debit-like functions outside the confines of a traditional bank account. There are open-loop gift cards that are specifically designed to replace cash as a gift and those are what should be used, not GPR cards. Open-loop and GPR providers should make sure that their marketing counters these messages and that advice like this does not lead their potential customers astray.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
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