When you are looking to get someone a gift but don’t know what to get them, you might have considered getting them a gift card so they can go buy whatever they like. But what if they don’t shop at Bed Bath & Beyond or eat at Applebee’s? A Visa gift card seems like a great idea since they are accepted everywhere.
Before you grab that American Express, Discover, Visa, or MasterCard gift card off the rack, these gift cards may be a worst gift than giving socks on Christmas.
5 Major Drawbacks of Visa Gift Cards
Even though this article is about Visa gift cards, it applies to other “open-loop” gift cards from the other major credit card issuers.
Prepaid gift cards are enormously popular as gifts and it’s not hard to understand why. They are convenient to use, more thoughtful than giving money, and safer than carrying around a big wad of cash. The prepaid card market is forecasted to reach $5.51 trillion by 2027.
Here is why you should reconsider giving someone a Visa gift card.
Fees and More Fees
Most retail store gift cards cost $0 in fees to purchase. You pay $25 for a Best Buy gift card and you get the full $25 loaded onto the card.
This is not the case for Visa gift cards. Below is a list of the standard fees to purchase a gift card with the Visa logo:
- $10.00 to $74.99 gift cards have a $2.95 fee
- $75.00 to $149.99 gift cards have a $3.95 fee
- $150.00 to $249.99 gift cards have a $4.95 fee
- $250.00 to $349.99 gift cards have a $5.95 fee
- $350.00 to $500.00 gift cards have a $6.95 fee
Should you buy a store-specific Visa gift card, you will pay even more. A Target $50 Visa gift card, for example, has a $5 activation fee. Walmart’s $50 Visa gift card has a $3.94 activation fee.
Had you given cash or a check instead, you would have saved the purchase fee.
The activation fee is just the beginning. Some Visa gift cards tack on additional monthly maintenance fees and inactivity fees. If the physical plastic card expires, you can obtain a replacement card but some issuers may charge a delivery fee for card replacement.
Before you buy that gift card, you will want to take a second to read the fine print first and look for the phrase “no fees after purchase”.
If you are set on giving a Visa gift card, you may want to take the time to shop around. Besides buying the gift card at your local grocery or drug store, you can also look online. Even Amazon has gift cards for sale.
They are Convenient Until They Aren’t
Many people give Visa gift cards because along with MasterCard gift cards, they are accepted anywhere credit and debit cards are accepted.
However, people have run into situations where their gift cards are declined leading to embarrassment and frustration as the checkout line backs up.
The most common place where people have run into problems using a Visa gift card is at the gas station. Many gas stations obtain a preauthorization hold to ensure there are enough funds available to cover the amount of gas purchased when you are paying at the pump.
These temporary authorizations can be as much as $100. When this amount is more than the available balance on the card, it can lead to the card being declined. To use a prepaid gift card at a gas station, you should go inside to prepay at the register.
Restaurants are another place where you may have issues using your gift card. Some places preauthorize an extra 20% for gratuity when a card is swiped.
Other businesses that use preauthorization holds are hotels and rental car agencies. Make sure your gift card has enough funds available before using it at these places and carry cash or a backup card in case the charge is declined.
Some people may struggle to spend the entire balance on the gift card and end up with a few dollars left on it. It is estimated that $3 billion in gift cards go unused each year according to the Mercator Advisory Group.
There are several easy ways to empty out that Visa gift card completely.
Many stores can split the transaction and let you pay using different methods of payment.
Another method is to use it online. You can spend the last few dollars on the Visa gift card by putting the funds onto an Amazon gift card to use later. Other methods I’ve used in the past include using it to partially pay my Comcast internet or my T-Mobile phone bill.
Fewer Consumer Protections
You should treat prepaid card purchases like cash. Any problems with a purchase will need to be addressed with the merchant.
Unlike a credit card or debit card, you cannot stop payment, lodge a billing dispute, or do a chargeback of the transaction.
Gift Card Fraud
There are many people who received a gift card and went to use it for the first time only to find that the money had already been emptied.
Hackers have used bots to randomly guess numbers on a store’s website gift card balance checker looking for a valid card with a balance.
Another way scammers have stolen money from gift cards is by removing the cards from the store display, carefully opening the package, and recording the card number and the PIN. Next, they will reseal the package and put the cards back on the shelf. Then the thief will check the card balance frequently while waiting for someone to buy and load the card with money. Once a card is loaded, the scammer will immediately use the card online or create a duplicate card to use in stores.
Store employees have gotten into the gift card scamming business too by surreptitiously activating a different card and giving back an inactive card to the customer.
Unless you registered a prepaid gift card and changed the PIN, realize that these gift cards can be used by anyone anywhere.
The terms of how gift card fraud is handled are listed out in the terms and conditions. Both American Express and MasterCard state that if they issue you a replacement card, it will have a value equal to the balance on the account at the time you notify them of the loss or theft. They will not give refunds for amounts debited from the account before you had notified them. You are left waiting while they do an investigation to see if they will return your money.
Prepaid gift cards from the major issuers are advertised as having the convenience of plastic. Except these types of cards come with major complications that aren’t encountered with normal credit cards.
You are almost always better off giving cash or sending a check. You wouldn’t send cash through the mail, yet no one thinks twice about mailing off a gift card.
An upside of a Visa gift card is your recipient can use it to shop online if they do not have a credit or debit card. For online-only usage, digital e-gift cards let you avoid some of the fraud and theft problems that come with physical gift cards.
Do you give gift cards as presents? Are there any other problems you’ve experienced when giving or using gift cards?
2 thoughts on “Beware of Visa Gift Cards: What You Should Know First”Jump to comment form and leave your response.
Agree with the article. It’s no wonder that gift cards are a 5.5 T market as they (VISA) make it really hard to get all the funds from a card. I almost always get errors (like “try again later”) registering cards and declines when trying to use them. Restaurants don’t have time to try getting fund portions left on cards, and give them back to you, asking for different form of payment.
I’ve never gotten Venmo to accept them. What I have done is gotten a relative to bill me the value of the card through PayPal, and then send me the amount back less the PayPal fee. So I lose the fee, but then I’m rid of the PITA VISA gift card. The best moment is finally cutting the card up. I’ve also called VISA support about these problems, but they just point the finger at the vendor trying to receive the funds.
Hi John, agree about the restaurants. The waiters/waitresses are already busy enough as is. I also hate holding up the line doing a split transaction at the register at the grocery store.
I actually wrote a post a while back about how I fully empty out my Visa gift cards by adding them to my Amazon Gift Card balance. Amazon doesn’t charge fees, the funds never expire, and I know I’ll eventually buy something off there. I’ve also been able to partially pay my T-Mobile and Comcast bills with them since their websites let me enter the exact amount I want to be charged from the gift card.