Is a Gift Certificate the Same as a Gift Card?
Discover the key differences between gift certificates and gift cards, covering their nature, function, and consumer protections.
Consumers commonly use “gift certificate” and “gift card” interchangeably. Both provide prepaid value for goods or services, but they have subtle differences in nature, function, and legal frameworks. Understanding these distinctions clarifies how each operates and the protections afforded to consumers.
Understanding Gift Certificates
A gift certificate traditionally represents a promise of goods or services from a specific merchant for a stated monetary value. These instruments often take the form of a paper document, an email code, or a simple store credit. Historically, they required manual tracking by the merchant.
Their functionality is straightforward, acting as a voucher redeemed at the issuing establishment. The value is deducted upon use, sometimes requiring manual balance tracking. While still in use, particularly by smaller businesses, their paper format can make them more susceptible to loss or damage.
Understanding Gift Cards
Gift cards, in contrast, function as stored-value products, often resembling a plastic card or existing as a digital code. They represent a prepaid monetary value redeemable for goods or services at a specified merchant or across a network of merchants. These cards operate through electronic payment systems, using features like magnetic strips, barcodes, or online redemption codes, often with a PIN.
The value on a gift card is electronically tracked, allowing for precise balance management and the ability to add more funds. Some gift cards are “closed-loop,” redeemable only at a specific retailer or brand. “Open-loop” cards are branded by major payment networks like Visa or Mastercard and can be used wherever those cards are accepted. This electronic infrastructure provides greater convenience and security.
Legal and Consumer Protections
Federal and state regulations govern gift cards and, to a lesser extent, gift certificates. The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 provides significant federal protection for many gift cards. This act mandates that most retail and network-branded gift cards cannot expire earlier than five years from issuance or the last date funds were added.
The CARD Act also restricts dormancy or service fees on gift cards unless there has been no activity for at least one year. Even then, fees can only be charged once per month. State laws can offer additional protections, sometimes distinguishing between paper gift certificates and electronic gift cards regarding expiration or fees. Unused balances may also become subject to state unclaimed property laws, known as escheatment, where funds revert to the state after a period of dormancy, typically three to five years.
Practical Considerations
Consumers should manage gift certificates and gift cards effectively. Check balances regularly online, by phone, or at the merchant’s location. Treat physical cards like cash; they typically cannot be replaced if lost or stolen unless registered with the issuer and proof of purchase is available.
Understanding the specific terms and conditions is also important. Some merchants have policies regarding cash back for small balances, minimum purchase requirements, or excluded items. To ensure full value, use gift cards and certificates promptly before expiration dates or dormancy fees apply, even with federal and state protections.