There are a variety of uses for Clutch stored value cards. This article outlines the different uses and provides recommendations and best practices for each card type.
Commodity Gift card – carries liability
A customer of a brand purchases this card and gifts it to someone else. Cards are subject to State and Federal Expiration and escheatment laws. The brand is responsible for reporting and accounting for all outstanding liability that will accrue for this card type.
Pre-paid card – carries liability
Generally a pre-paid card stays with the purchaser for re-use and is reloaded as it is depleted. It can also function as a loyalty card if required. Pre-paid cards should be labeled as Pre-pay or Loyalty card (NOT Gift card). The brand must follow State and Federal guidelines regarding expiration for Closed loop prepaid cards.
Promotional Dollar Gift Card – Advertising expense upon redemption
These cards are pre-loaded with an amount chosen by the brand for the event in which they are being distributed. Customers may or may not be required to “register or enroll” card by providing demographics prior to use. The redemption rate of promo cards is significantly higher than coupon redemption. These cards can expire – Terms and Conditions should be spelled out on the card or with separate collateral.
Promotional Product Gift Card – Advertising Expense upon redemption
These cards can be issued or pre-loaded with a custom value type or product code and can be used for promotional gifting. For example, a brand may issue a card for 1 “surprise” when a purchase of $50.00 is made. The business can then determine what that “surprise” will equal. A restaurant may choose to have the surprise be a free dessert while a retail outlet might fulfill that value with a 30% discount or a free t-shirt. The card might also be loaded with a specific value type such as 1 hat or 1 KeyChain. These cards can expire. Terms and Conditions must be spelled out on card or with separate collateral.
Discount Card – Advertising Expense upon Redemption
Sometimes these cards are not transacted against but only shown as a way to redeem a certain discount on services or products. A brand can require registration to collect demographic information from the card holder.
Merchandise Credit – Carries Liability
These cards are used to issue funds when merchandise is returned to store. The allows funds to stay within a brand vs. the issuance of a Credit Card refund. Generally these cards use a specifically labeled Merchandise Credit card with a distinctly different look and feel from the brand’s commodity gift card. In the Clutch back-end, these cards will be housed in a separate program to separate liability from commodity gift cards. They may not be subject to the same expiration laws/rules as a commodity gift card.
