All about pre-paid gift cards

Gifting to your loved ones is an essential part of Indian culture and is special. However, it often leaves many of you hassled as you are unable to come up with appropriate gifting ideas. For all those of you who face a tough time in choosing gifts, a pre-paid gift card is an excellent option. Read on to understand more about pre-paid gift cards.

What is a pre-paid gift card?

The pre-paid gift card is a smart gifting solution which essentially works like a gift voucher. A pre-paid gift card is a magnetic strip based pre-paid card which looks similar to a credit card or debit card. However, a pre-paid gift card is neither a credit card nor a debit card in entirety. It is not like a credit card as it does not allow the user to accumulate debt on the card. It is also not like a debit card as the amount spent is not linked to the bank account.

You can purchase pre-paid gift cards from banks by paying the value of the pre-paid card along with any joining fees, if applicable. Once the bank receives your funds, the card will be activated with the loaded amount. You can then gift this activated pre-paid gift card to anyone, and the recipient will be able to use it across merchant outlets which accept that particular type of card (Visa, Mastercard or American Express, as the case may be). Every time the gift card is used, the purchase amount is deducted from the card balance. The recipient can use the card till the entire amount is used.

Features of pre-paid gift cards

Pre-paid gift cards are issued by most leading banks in the country, in association with Visa, Mastercard or American Express. Some online portals also sell pre-paid gift cards.

• A pre-paid gift card is issued in a particular currency. Most cards issued by Indian banks are issued in Indian rupees.
• Some pre-paid gift cards come with a PIN, which can be used to check the card’s balance and transaction history, making it easy to track.
• The gift card is meant for electronic use and can be used only at merchant establishments which have the terminal which accepts such pre-paid gift cards.
• Pre-paid gift cards are available in various denominations of Rs. 500, Rs. 1000, Rs. 2000 and Rs. 5000. Some banks also issue in multiples of Re.1.
• Pre-paid gift cards can either be recharged/reloaded or are non re-loadable. Majority of the banks issue cards which cannot be reloaded.
• The balance on the pre-paid gift card can be found out at anytime by the user, either by contacting the bank or by using it in the bank’s ATM.
• Funds in the pre-paid gift card are non-transferable to any other card. Cash withdrawal on such cards is also generally not permissible.
• Pre-paid gift cards have a validity period. Most banks issue it with a validity of 1 year.
• Fees and Charges

A nominal fee of Rs.50 – Rs.100 + service tax is charged as joining fee when you purchase the pre-paid gift card. In the case of loss of card, a similar amount is charged for a card replacement. Some banks levy similar amounts towards other charges like requiring physical statements, regeneration of the PIN, cancellation etc.

Documentation required

Most banks do not require the purchaser of the gift card to be their customer. If the purchaser is not a customer of the bank, then a full KYC is carried out. The purchaser needs to provide a proof of identity card and a residence proof along with the completed gift card application form. On the other hand, if the purchaser is a customer of the bank, then such formalities are not required.

Benefits

• The pre-paid gift card is more personal than cash and hence is a popular gifting option.
• The receiver is free to decide how he wishes to spend the card amount. A wide variety of options including shopping, dining and partying is possible with the gift card.
• It is more durable and easier to carry compared to any other type of gift voucher.
• The pre-paid gift card offers the ultimate flexibility of usage – the user is free to decide the value and location to spend the amount according to his wish.
• The user can track the usage of the card and check any upload and expenditure immediately.
• Pre-paid gift cards have wide acceptability.
• Pre-paid gift cards are safer compared to cash and gift certificates, as they carry a unique ID numbers.

Prepaid gift cards have become a popular gifting option in recent times in India on the back of various benefits and have carved a niche in the market.

What is the difference between a debit card and a prepaid debit card?

Even though it’s called a debit card, a prepaid debit card is very different from a bank account debit card. A bank account debit card is linked to your checking account; a prepaid debit card is not. Instead, you pay in advance to load funds onto a prepaid card, and then use the money you have loaded onto the card.

In most cases, you can’t spend more money than you have already loaded onto your prepaid debit card, but with bank account debit cards, if you opt into your bank’s overdraft service, the bank may cover the cost of a purchase that exceeds what you have in your account, and charge you a fee (as well as requiring you to repay the overdraft.)

In addition, prepaid debit cards may carry fewer consumer protections in the event of loss or a disputed charge than debit cards.