Bank Gift Cards Come Wrapped With Limits

By Caroline E. Mayer
Washington Post Staff Writer
Friday, February 17, 2006

Visa likes to say that "finding the perfect gift just got easier" with its gift card.

But recipients of those cards -- or similar ones issued by MasterCard or American Express -- are discovering that using them presents unexpected difficulties.

Kari Schoerner, who had a $25 Visa gift card, used it to buy a $13 book. Then the Perryville, Md., Army contract specialist tried to use the balance as partial payment for a $30 clothes purchase. The card was rejected for insufficient funds because the balance was only $12. Discouraged by her inability to combine the leftover value with cash, Schoerner stuck the card in her purse and hasn't tried to use it since.

"It kind of stinks," said Schoerner, who said she will still try to use the card. "I will make sure I spend less than what's on it, so I probably won't be able to use the full value of the card."

Lisa T. Winston of Forestville had the same problem with her $50 American Express gift card. The government employee has about $2.39 left on the card and is not sure when she will be able to use it: "Unless I buy some gum at CVS . . . I guess it will just go to waste." Next time, she said, "just give me the cash."

Credit card companies either say that they have been unaware of the problems or that they are working to solve them.

With the demise of paper gift certificates, plastic gifts cards have become a big and rapidly growing business, exceeding $110 billion in sales last year, according to David Robertson, publisher of the Nilson Report, which monitors the credit industry. "By the end of the decade, that $110 billion number will triple, so it's going to be a very, very lucrative business for some, steady income for others."

Over the 2005 holiday season, the National Retail Federation estimated, three out of four consumers purchased gift cards. And now, at tax time, leading tax-preparation software company TurboTax is giving taxpayers the option of receiving tax refunds in gift cards.

Most gift cards are store cards that may be used at only the issuer's stores. But bank cards -- those that carry the logo of the major credit card issuers -- have been rapidly gaining in popularity. Banks have aggressively promoted them as more versatile because they can be used almost anywhere.

But increased use has been accompanied by growing complaints. Dan Horne, assistant professor of marketing at Providence College and a gift card expert, blames the difficulties on the data-processing systems that have been set up to process electronic payment transactions.

Many systems are not capable of handling multiple forms of payment for a single transaction. And often merchants cannot determine how much money is left on a card. So, if a purchase is for more than the card's balance, the card may be automatically rejected, just as a regular credit card is blocked when customers exceed their credit limits.

The result, Horne estimates, is that about 5 percent of cards' value may go unredeemed.

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