Reward Cards v. Gift Cards…whats the main difference?
In 2004 when we first started selling Visa® gift cards, both consumers and corporate clients bought the same type of card. We called it an ‘open loop Visa gift card’ or also named ‘prepaid cards’ and for consumers they were not branded, but corporate clients they were branded with the companies logo. Confusion arose because Reward and Loyalty cards, were different than gift cards. The industry started to carve out different segments of Prepaid Cards – categorizing Gift Cards, Reward Cards, Reloadable Cards, Non reloadable cards, Payroll cards, Expense Cards, and more. Then in 2009, Congress passed the Credit Card Accountability Responsibility and Disclosure Act of 2009 or CARD Act of 2009, which was initially intended to address issues with Credit Card companies, but included Prepaid Card definitions and legislation.
- Establishes standards concerning gift cards
- Prohibits retailers from setting expiration dates less than 5 years after the card is purchased.
- Prohibits retailers from charging dormancy, inactivity, and service fees unless the card has not been used for at least 12 months. If fees are charged after this period, the details of such fees must be clearly established on the card, but retailers cannot assess more than one fee per month under any circumstances.
Further, the Corporate prepaid branded cards, were now moved out from being ‘Gift Cards’ to be treated more as a Reward or Loyalty card, which better defined what they were.
Typically in the Reward Card program, there is a set expiration date for the reward card. Typically one year. The cards funds no longer exist after the expiration date, and the Corporate provider of the Reward Card retains the unused funds or they are returned to the purchasing company depending on the agreement between the two parties. These funds do not escheat to the state or federal government. They are not he same as a Gift Card, though many people confuse the two.
Examples of Prepaid Card providers are: