Gift Card Processing in Ogden
Gift cards have been a growing trend in merchant services since the mid 1990’s. There are two types of gift cards; closed loop and open loop cards. Closed loop cards are gift cards that are only accepted at the store that issued the card. Open loop cards are gift cards that are accepted just like credit and debit cards and work at most every store. The process of issuing and redeeming these cards are different than the process used with credit card processing.
Closed Loop Gift Cards
Closed loop gift cards were the first gift cards to hit the market. This service has allowed loyal customers to refer a friend to shop at the company and try out the company’s products or services. Closed loop gift cards allow merchants to expand their market through their already recurring customers. It has also become popular among business to give a closed loop gift card to a customer in place of a return, sometimes this is done only if the customer returns an item without the receipt.
Open Loop Gift Cards
Since open loop gift cards can be used at nearly every business establishment, the service is more customer friendly. However, this also means that the bank issuing the open loop gift card will most likely charge a small upfront fee to cover the cost of the card’s production and use. Open loop gift cards are similar to credit card processing services since open loop cards require an issuing bank. The issuing bank covers the cost on the gift card and is able to connect the merchants, the processor and the customer to make the purchase much easier. Once the open loop gift card has been used, the issuing bank distributes the funds used to the merchant via the processor.
Dangers of Gift Cards
While gift cards can make things easier for merchants and customers alike, there are some dangers associated with both closed and open loop gift cards, here are some of the risks associated with gift card services.
- Redemption Rates – In some cases, gift cards might be lost, destroyed, or damaged while there is still money on the card. Some gift card receivers have failed to replace the gift card, leaving the money on the card. This does not save the buyer of the gift card money and this action leads to financial gains for the retailer without losing any product.
- Overspending – Overspending on the gift card’s balance is one way the merchant is able to make money off issuing gift cards. Gift cards are issued in neat balances, like $10, $25 or $100, and it is rare that a purchase rounds out evenly to these totals after tax is added causing the customer to spend money out of pocket to cover the added expense.
At CardPRO Systems, we will gladly assist any business in need of merchant services, especially those in Ogden, Clearfield, Layton, Farmington, and Bountiful, Utah.
If you are interested in gift card processing, or any of the other merchant services we offer here at CardPRO Systems, you can contact our Ogden, UT office here or give us a call at 844-385-2273 to get setup today!