There are plenty of people who still follow the time-honored practice of giving an envelope of cash as a gift when they have no idea what a friend or relation really wants. This is becoming increasingly rare, however, as many are going with prepaid gift cards instead. But what kind of prepaid card should you choose?
The global gift card market is expected to hit $750 billion in sales by 2026, according to Research and Markets. If the idea of slipping a few twenties into a birthday card doesnâ€™t appeal to you, there are countless gift card options, all with their own pluses and minuses.
Weâ€™ve rounded up the advantages and disadvantages of each type of prepaid gift card. If youâ€™d like to give a prepaid card as a gift, store-branded cards might be your best bet â€” if you know what kind of store your recipient prefers. If you donâ€™t, a more generic credit card-branded prepaid gift card might be a better choice.
When you think gift card, you probably think of a store-branded card â€” from Macyâ€™s, Best Buy or L.L. Bean, for example â€” which are only valid at a specific retailer. Another option is a credit-branded gift card â€” from MasterCard, Visa, or AmericanExpress â€” that can be used anywhere those credit card brands are accepted. Both types carry a set amount of money, and most are not reloadable.
A prepaid debit card, meanwhile, is not commonly given as a gift, but usually used by people in a way similar to a checking account. They load money on the card or have others deposit funds on the card, and then they can use it like a regular debit card â€” although itâ€™s not connected to a bank account. These cards can be given as gifts, but theyâ€™re not a great option because of their expense. Many of them have monthly charges as well as other fees for reloading the card or using the card to withdraw money from an ATM.
A prepaid gift card is often used as a stand-in for a checking account for people who would have a hard time getting a checking account with a bank. You can use them to pay for items in a store, and even have your paycheck or Social Security benefits deposited on them.
Here is a closer look at some pros and cons of prepaid store- and credit-branded cards, and prepaid debit cards.
These are straightforward Starbucks, Old Navy, Amazon or you-name-it cards, branded by a single merchant and usable only for a prepaid amount of that merchantâ€™s products.
Visa, MasterCard, Discover or American Express gift cards offer prepaid purchase values in varying amounts.
These are not, primarily, gift cards and therefore are not subject to federal rules regulating gift cards, so users should beware. Like Visa, MasterCard, American Express and Discover prepaid gift cards, they are typically redeemable wherever network-branded credit cards are accepted. They are also often used more like debit cards because they can be reloaded with money, though unlike regular debit cards they are not connected to a bank account.
Whether youâ€™re in the market for retail gift cards, or Visa, MasterCard, Discover, or American Express gift cards, always read the fine print. And of course, youâ€™ll want to make the best use of your prepaid gift card, whether youâ€™re the giver or the recipient. Here are some ways to make that happen:
All gift cards and prepaid debit cards have their advantages and disadvantages. The smart shopper who keeps this in mind, however, should be able to find a good deal. Still, itâ€™s important to stay sharp even after making your purchase, given the abundance of fraudsters out there hoping to cheat the unwary.
One particularly popular current scam, surprisingly, involves draining the value from iTunes gift cards. After pitching a story about an old friend or relative in need of assistance, or the chance to secure a valuable prize in exchange for paying a fee, the scammer asks you to buy an iTunes card and give them the serial number â€” which they immediately use to drain the cardâ€™s cash value or sell the card online.
The quick takeaway? Never give your payment information or gift card information to a stranger. The important thing, whether youâ€™re the gift-giver or recipient, is to make a prepaid gift card a present that can be enjoyed instead of a hassle.