We are occasionally asked why we don’t buy and sell “use anywhere” Visa, Mastercard and American Express gift cards.  These cards – referred to in the industry jargon as “open loop” cards – may be redeemed at any merchant that accepts Visa, Mastercard or American Express, as the case may be, as a payment option.  These are different from the merchant issued “closed loop” cards we buy and sell on a regular basis … closed loop cards typically may only be redeemed at the merchant that has issued them (for instance, at Target).

There are a few answers.

Fees & Expiration Dates

First, many of these cards have ongoing fees associated with them that can reduce the redemption value over time.  While the open loop industry has done a good job at making these fees easier to sort through, we don’t want any of our customers to have a disappointing experience if these fees reduce the value of the card with time.  Since there are a wide variety of these cards in market, many with very different fee schedules, we have chosen not to add to the confusion.  Plus, open open loop cards tend to have expiration dates, and we want to make sure that the card does not expire before you could put it to good use.

Best Deals on the Brands You Love

Second, most of our customers tell us that they prefer buying a card issued by a specific retailer.  Why?  Simple really – because our customers really want to shop at that specific retailer, and are looking to Plastic Jungle to make that shopping experience as valuable as possible.  That’s easier for us to do with closed loop cards than with open loop.

Anti-Fraud

A third reason is perhaps not so obvious, and that has to do with Plastic Jungle being a good corporate citizen.  Early in our life, we did occasionally buy and sell open loop cards.  But we quickly came to the realization that there really wasn’t any good reason for someone to sell us a “good as money” card at a discount.  And if there wasn’t a good reason we needed to ask ourselves why someone would do so.  There are several benign explanations, but one thing we did want to be careful about was that Plastic Jungle was not to be misused as a channel by which money could be “laundered”.  The financial services industry is very cautious and attentive about money laundering issues, and works closely with governmental regulators to ensure that the payment systems are not misused to achieve nefarious ends.  One way Plastic Jungle can play its own small role is by not purchasing open loops cards at a discount.  This closes off any potential for a criminal or terrorist, or someone unwittingly working for them, to purchase open loop cards for cash, and then sell them to us for cash or check (at which point the money is considered “laundered”, meaning difficult to trace to its source).   It’s a small role, but one we are happy to serve.

All that said, we are considering carrying open loop cards for sale that are not acquired from the open market, but instead are acquired directly from card issuers.  These cards are not open to money laundering since they were not purchased from an individual.  This also means that we can be more explicit about what types of fees may be associated with these cards and can even help you comparison shop to find the best deal.  If you think this is worth us doing, please let us know by commenting below, and we will consider it.

In the meantime, we will continue to do our part in making sure that our business serves your interests above all others.

The post below is a follow up post from our friend Peter Camenzind at giftcardadvocate.org. We hope you find his insights helpful. In case you missed it, read what Peter had to say about using open-loop gift cards online. Be sure to leave your comments and questions below. Thanks again Peter!

Additionally, please note, Plastic Jungle does not buy or sell open-loop gift cards since they fall under a different set of rules and business regulations.  Stay tuned for more thoughts on this topic from our President, Bruce Bower.

Open-loop (Visa, MasterCard, American Express, Discover) gift cards can be very difficult to use successfully.  In my last post, I discussed how some of their limitations and how to best use them for online purchases.  In this post, I’ll discuss how to best use them for in-person purchases at retail establishment.

If you have a particular retailer in mind to use a gift card at, whether for yourself or someone else, closed-loop gift cards (Target, Wal-Mart) might be a better choice as virtually none of the open-loop gift card issues (like fees and verification) exist for closed-loop cards, and they are often available at a discount.

In-person purchases

Using these cards in-person can be tricky in many situations.  First, be aware that purchases at restaurants and gas stations are treated differently than most other purchases.

When you want to buy gas at the pump at a gas station, the gas station will automatically put a $50 or $75 hold on your card before you pump gas.  If your card does not have enough for the hold on it, you are out of luck, and won’t be able to use the card at the pump.  You may be able to present the card to the cashier, explain the situation, and pump gas as you would with a cash purchase.  However, be prepared to  cover the purchase with cash if it doesn’t work, especially if you tried it at the pump first, because of authorization holds as we explained in part 1 of this series.

You may also run into problems using gift cards that have not been registered at gas stations, and specifically at the pump, because the majority of gas stations now require you enter your billing zip code.  If you plan to use your gift card at a gas station, and have considered the $50/$75 hold issue, register your card first and use the zip code of the address you registered.

When you want to pay for a meal at a restaurant, most restaurants point-of-sale (POS) systems will automatically place a hold on the amount of your bill, plus an additional 20% to make sure you have enough available credit (or funds in the case of debit cards) for a tip.  If you want to pay for a $50 meal with a $50 gift card, and pay the tip in cash, you are out of luck as the card will be rejected as the system will attempt to authorize it for $60.  You could always ask the server to put $35 of a larger bill on a $50 gift card and then fill in the rest as part of the tip.

Other than gas stations and restaurants, most other merchants should have few problems with open-loop gift cards as long as you are aware of your balance, are sure there are no holds on your funds (from failed purchase attempts that have not cleared) and are not trying to purchase using a split-tender transaction, a special kind of gift card problem.

When you use a closed-loop gift card (like Target), almost all retailers POS systems are capable of (a) checking the balance on the card, and (b) applying the remaining balance on the card to your purchase and then applying another type of payment to the remainder.  This is called a split-tender transaction.

However, with open-loop gift cards, merchants are not able to check your remaining balance (except in a few rare cases) and most cashiers have not been properly trained in split-tender transactions, if the POS system is even capable of doing one.  That is the main reason that open-loop gift cards are so frustrating, because getting the last few bucks off of the card is very difficult.  I have yet to find a retailer, online or brick-and-mortar that says they support split-tender transactions.

MasterCard and Discover have recently introduced new merchant requirements that will solve many of these problem, like holds, balance checking, and split-tender transactions, but it will be a year or more before those fully take effect.

About the author:

Peter Camenzind is small-business owner, tech entrepreneur, and consumer advocate.  He created the site giftcardadvocate.org to help provide consumers with information on how to get the most out of their gift cards.

The following post is from our friend Peter Camenzind at giftcardadvocate.org. We really appreciate the time Peter has taken to share his expertise with our community, and we hope you find his insights helpful!

Please note, Plastic Jungle does not buy or sell open-loop gift cards since they fall under a different set of rules and business regulations.  Stay tuned for more thoughts on this topic from our President, Bruce Bower.

Open-loop (Visa, MasterCard, American Express, Discover) gift cards, while not tied to a particular merchant, can be very difficult to use successfully.  In this post, I’ll discuss how to best use them for online purchases.  In my next post, I’ll cover simple rules for using them at a merchant in-person.

If you have a particular retailer in mind to use a gift card at, whether for yourself or someone else, closed-loop gift cards (Target, Wal-Mart) might be a better choice as virtually none of the open-loop gift card issues (like fees and verification) exist for closed-loop cards, and they are often available at a discount.

Online purchases

These cards in most ways look electronically just like credit cards, and most people want and expect them to behave just like credit cards.

When you try to use a card for an online purchases, whether it is a credit card or an open-loop gift card, you will be asked to enter the billing address for the card, which is used for the address verification system (AVS) where the numbers associated with the address you give (house number on street and zip code) are compared with what is on file for the card.

Some gift cards simply ignore AVS, which means that the issuing bank sends the merchant an AVS code that says AVS is not being used.  Here is where the trouble starts.  Most merchants will see this as an address verification pass, but some will see it as a fail, and the transaction will be declined.

Some gift cards do not ignore AVS, which means that until you go to the website listed on the card and register it to an address, the AVS check will always come back as a fail.  There is no way to tell what cards behave in which ways, and in some cases cards issued by the same bank that look exactly the same will behave differently in this respect.

So you just tried to use your card which you had not registered, and it failed because the address verification failed.  Guess what?  Now your card has a hold on it for the amount you tried to purchase.  These holds will typically last for more than a week and up to three weeks!

If you plan to use a card online, unless you know that it is the type that does not use address verification, always register your card to the address you plan to have stuff shipped to, before you use it.  It may also help to test the card out with a small purchase (so it doesn’t put your entire card value on hold) before you make a larger purchase.

MasterCard and Discover have recently introduced new merchant requirements that will at least help by significantly reducing the length of time your funds are on hold after a failed transaction, but it will be a year or more before those fully take effect.

In my next post, I’ll discuss using open-loop cards in-person.

About the author:

Peter Camenzind is a small-business owner, tech entrepreneur, and consumer advocate.  He created the site giftcardadvocate.org to help provide consumers with information on how to get the most out of their gift cards.