February 28, 2014
Gift cards are easy, convenient, and beneficial — both for companies and customers. They ease the stress for customers seeking the “perfect gift,” while simultaneously bringing new people to your business and giving your brand exposure.
If your startups offers the types of products or services that could be packaged into a gift card, here are some simple rules to guide you, including some legal details you need to know before getting started:
1. Know your limits.
You need to consider the individual limitations and statutes of your state before you create and distribute your gift cards. For example, in California, you can’t put an expiration date on a gift card, and the card must be redeemable for cash, no matter the value. Most states prohibit fees of any kind, but some (like Georgia) allow dormancy or non-use fees if they’re clearly displayed. Check out the statutes for your state here.
2. Read the Credit CARD Act.
The same goes for federal statutes. The Credit CARD Act of 2009 describes nationwide regulations for all cards, including credit cards and gift cards. For example, a vendor may place an expiration date on a card, but it must be at least five years from the date of purchase. Best practices for expiration dates vary by state, but first make sure you’re adhering to federal law.
3. Choose your strategy.
Once you move past the regulations, there are a surprising number of ways to offer this kind of gift to your customers. Will you have a magnetic swipe strip or certificates? What are the minimum and maximum values you’ll place on the cards, and should you offer them as promotional items to encourage greater spending? While best practices are fairly simple in accordance with the law, there’s a lot to consider when making gift cards work for you from a business perspective, including how to distribute and leverage them to prevent loss.
4. Be stylish and seasonal.
Gift cards can promote your business like tiny billboards. They reflect your brand and style and can multiply your influence since they’re often given from an existing customer to a potential customer.
In addition to representing your brand in an exciting way with fun, branded card designs, you should also consider creating themed cards for major holidays or seasonal events, like back-to-school shopping.
5. Reload, return, and repeat.
Reloadable cards encourage customers to return to shop with you, but you still have to work to keep those customers engaged. While only 9 percent of consumers will reload a card on their own, this percentage greatly increases when you introduce incentives and promotions. Best of all, customers with gift cards are likely to spend more than the actual value of the card because they’re looking to spend at least that much already.
Customers love how gift cards make their shopping experience easier. They are convenient (yet thoughtful) gifts that allow recipients to get things they actually want.
Gift cards aren’t just great for your customers, though. When implemented strategically, they can increase brand visibility, turn existing customers into brand advocates, motivate new customers to spend more, and offer one more avenue to connect with your customers in a positive way. Just follow the steps above to ensure that your cards are in compliance and that they’re working in your startup’s favor.
Guest author Daniel Wesley is the founder and CEO of CreditLoan.com, a website that educates consumers about various personal finance issues. Among some of the topics discussed are bad credit loans, credit cards, auto financing, small-business finance, and many other credit and financial help issues. Connect with Daniel on Twitter and Google+.
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