A New Look For And At Gift Cards | AccountingWEB

A New Look For And At Gift Cards

Gift cards are a popular option to gift buying. Trying to dispel the generic look and feel associated with gift cards, merchants are dressing them up for the season. Gift cards are available picturing Christmas trees, birthday gifts and wedding scenes, to name just a few. Some gift cards can even be personalized with a message!

Merchants are also getting creative with packaging. Coffee retailer Starbucks, always a popular standby, has replaced the familiar paper sleeve with a festive red felt pouch giving their card less of a “last minute” look. Other retailers are getting into the novel packaging act as well.


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Some merchants are offering perks as a means to increase sales. Target has a musical gift card. Sony’s gift card comes with boxed chocolates. These perks target those aged 35 to 44 who earn more than $150,000 annually and account for the majority of gift card sales, according to Deloitte & Touche.

Before purchasing a gift card, buyers should check the facts. Marshall Cohen, chief industry analyst for NPD Group, told the Orange County Register that retailers have an interest in helping consumers spend the card dollars as fast as possible because an accounting rule prohibits stores from counting the gift cards as sales until the dollar amount is redeemed. Buyers should also look into other terms associated with gift cards, including expiration dates and how remaining balances are treated.

Using a gift card for some purchases may also be tricky. For instance, if the item being purchased exceeds the dollar value available on the gift card, the buyer should first ascertain which payment methods, such as check, credit card or cash, the merchant will accept to cover the difference and inform the seller that both the selected payment method and the gift card will be used to pay for the item.

In addition to the gift cards available through merchants and retailers, prepaid “credit” cards are available through banks and credit card merchants. The cards come in various amounts and some fees and restrictions may apply. Fees, such as monthly service charges, lost card fees and “reloading” fees are the most common fees deducted from prepaid cards. Some cards cannot be used at certain ATMs, casinos, airlines and car rental companies, for instance. Use at fuel pumps, cruise lines or hotels may also be difficult because some of these places authorize “anticipated charges” which may exceed the balance available on the card, resulting in a declined card.

Be aware that while cards may be a great gift idea, they may not be hassle free.

For more information about the tax implications of giving gift cards as gifts to employees, see Talking Turkey About Employer Gifts.

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