Thursday, November 13, 2008

No Time Like "The Present" to Use Gift Cards

I wrote about this a couple days ago (Short Circuit in Gift Cards?), and today there's a video story on San Francisco's ABC News.  As I stated, the best time to use gift cards is immediately.  Until someone comes up with a better method for protecting consumers.  Sharper Image gift card holders lost around $25 million. Linen's and Things in in the midst of it's mess and Circuit City is next.  If you'd like to watch the video, click the link below... 

Bankrupt stores have no cash to back gift cards - 11/13/08 - San Francisco - - Video Available
Last year's most popular Christmas gift is now one of the most feared -- the gift card.

Consumers spend an estimated $50 to $80 billion a year on gift cards. It's become big business and the gift of choice for people like Freddie Vasquez.  "It's easy. You just find what it is that they like, go to the store, get it and you're done," said Vasquez, a San Francisco resident.

But with major retailers in trouble, those gift cards could become worthless. Under California law, bankrupt companies that are still doing business must honor gift cards. Consumers, however, have little recourse if a retailer closes their doors for good.  An estimated $25 million worth of gift cards went unused by the time Sharper Image shut down.

"You're average consumer doesn't know who's in trouble. They don't know financially who's in trouble. So that's why buyers you know have to beware," said Professor Eugene Muscat, from USF's School of Business and Management.

Retail industry researchers say gift-card holders could lose over $75 million from store closures by year's end. Which in large part explains why 43 percent of consumers say they plan to give gift cards less often this year. Regardless, consumer researcher Kathleen Kusek doesn't expect retailers to give in so easily.

"I think they might add incentives to gift cards, so perhaps with getting a $100 gift card the buyer will get a discount on another purchase they're making. That there will be other value added things to encourage the gift card market because it is so profitable for retailers," said Kathleen Kusek, a consumer researcher.

Even so, many shoppers are being cautious with their holiday shopping by buying gift cards from stores they're confident will stay afloat, or by going the old-fashioned route.

"I'll probably just pick out gifts his year," said one shopper.  "I don't want to give a gift that someone can't redeem," said another shopper.

If you do receive gift cards this holiday season, retail experts say the best advice is to use them right away.

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Chase Paymentech Gift Card Study Released

Payments News: Chase Paymentech Announces Gift Card Study Results - November 13, 2008
Chase Paymentech Announces Gift Card Study Results

Chase Paymentech has announced the results of a survey commissioned to provide insight into consumers’ attitudes towards gift cards. "The study, which polled 850 American adults, found that gift card awareness and usage remains very high, with nine in ten respondents having received or purchased a gift card. Additionally, two-thirds of respondents have bought at least one gift card within the past 12 months."

Just as impressive, the data also shows that most adults (55 percent) plan to buy the same number of cards as they did last year, and 21 percent plan to buy more. Similar estimates show shoppers plan to load either the same amount (55 percent) or more (21 percent) funds on those cards. All things considered, the study suggests retailers with gift cards to be well positioned during what is anticipated to be a slow holiday season.

“Gift cards are an interesting opportunity for retailers,” said George Wilcox, Group Executive, Chase Paymentech. “What our research indicates is that gift cards may prove to be a bright point in a retail season that’s going to face its own share of challenges.”

Additional results provided by this study include:
  • Typically, consumers spent more than the amount of the gift card when they are redeemed, with 85 percent adding an average of $17.70 out of their own wallets.
  • Gift card buyers who purchased a gift card within the past 12 months bought 4.7 cards for others, in addition to two cards for themselves. This may indicate that gift cards are being used as potential budgeting tools.
  • 82 percent of users said that a discount for the purchaser's use when buying the gift card would make them somewhat or much more likely to purchase gift cards. Free specialized gift packaging for cards is a strong purchase motivator as well (61 percent).
“One of the more compelling aspects of this study,” said Wilcox, “is that gift card buyers plan well ahead of time to purchase a gift card.”

Retailers need to answer this enthusiasm with visible and accommodating gift card displays.

More than one-third of past year gift card purchasers (37 percent) have entered a store intending to buy a gift card and left without buying it because:
  • They couldn’t find the gift card display (21 percent)
  • They didn’t care for any of the designs (21 percent)
  • They changed their mind and decided on another item (20 percent)
  • The cards were locked behind the counter (15 percent)
Retailers who are aware of gift card popularity, and make gift card purchases easy for consumers, are more likely to capture those sales.  “During a down holiday season, where each sale is increasingly important, gift card purchases will be crucial,” said Wilcox.
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Sorry...No Credit Card Forgiveness!

Regulators nix credit card debt forgiveness plan - Yahoo! News

"Credit card charge-off rates, balances written off as unpaid, rose to 6.8 percent in August, up 48 percent from a year earlier, according to Moody's Investors Service. Americans are weighed down by about $900 billion in credit card debt, according to the latest available Federal Reserve figures."

Editor's Note: Look at the graph below. In 2007 it was half as much. It doubled in a year!

WASHINGTON – Federal bank regulators have rejected a request by banks and consumer advocates for a program to let lenders forgive huge portions of credit card debt.

The Office of the Comptroller of the Currency rejected the request for a special program that would allow as much as 40 percent of credit card debt to be forgiven for consumers who don't qualify for existing repayment plans. An unusual alliance of financial industry interests and consumer advocates, represented by the Financial Services Roundtable and the Consumer Federation of America, made the request to the Treasury Department agency on Oct. 29. It demonstrated the urgency of the situation in a deepening economic crisis: consumers — even those with strong credit records — defaulting at high levels on their credit cards, while banks battered by the credit crisis bleed tens of billions from the losses.

An agency official said the government objects to allowing banks to defer losses for several years on the forgiven debt, as would occur in accounting by lenders under the special program.

The Financial Services Roundtable, which represents more than 100 large banks, brokerage firms and insurance companies, will "continue to look for ways to help consumers in these extraordinary times," said the group's senior vice president, Scott Talbott. Travis Plunkett, legislative director of Consumer Federation, said that with the number of deeply indebted consumers growing dramatically, "we still hope to work with bank regulators or Congress to create an alternative" to bankruptcy for them.

Under the proposal, borrowers would be able to defer payment of income taxes they owe on the forgiven part of the credit card debt until after the remainder was paid off. The lenders could wait until then to book their losses on the forgiven debt.

The two groups hoped such a pilot program would become permanent and that as many as 50,000 people struggling with credit card debt would be involved. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent. Consumers would be allowed to pay back the remainder over several years.

The largest credit-card banks each set aside between $1 billion and $3.5 billion in the third quarter for losses on card loans as their profits plummeted. The biggest credit card lenders include Discover Financial Services LLC, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Capital One Financial Corp., American Express Co. and HSBC Holdings.

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Banks to Halt Money Transfers for Net Gambling

Editor's Note: Why is Barney Frank (no relation l'm proud to say :) against this?  AML (Anti-Money Laundering) was designed in large part to prevent the funding of terrorist organizations.  I thought this law had passed in 2006, apparently they're tightening it up with this final rule.   
Banks told to halt money transfers for Internet gambling

The government today gave banks and other payment services a year to stop transfers of money to Internet gambling sites.

The move came as the Bush administration issued a final rule implementing the Unlawful Internet Gambling Enforcement Act of 2006, which bans payments made through credit cards, electronic funds transfers and checks for online wagering. The Treasury Department and Federal Reserve set a Dec. 1, 2009, deadline.

Two days ago the chairman of the House Financial Services Committee, Rep. Barney Frank, D-Mass., urged the White House to not go forward with the ban, arguing that should be left to President-elect Barack Obama.

"This midnight rulemaking will tie the hands of the new administration, burden the financial services industry at a time of economic crisis, and contradict the stated intent of the Financial Services Committee," Frank said.

By not defining illegal Internet gambling, the law is "leaving it to each financial institution to reconcile conflicting state and federal laws, court decisions and inconsistent Department of Justice interpretations when determining whether to process a transaction."

The NFL lobbied for the ban. Naturally, the Net gambling industry and Las Vegas were against it.

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Unembossed Around

Dynamic Card Solutions experiences high demand for unembossed cards
Thursday 13 November 2008 | 10:00 AM CET

Instant issuance card provider Dynamic Card Solutions (DCS) reports that it is experiencing increasing demands from financial institutions for its instant issuance unembossed 'flat' cards.

DCS develops and manufactures CardWizard, an instant issue and PIN selection software application which aims to provide financial institutions a card issuance model which allows for the personalization of customer and associate cards according to the various affinity programs or institutional brands they represent.

The company attributes the increasing demand for flat cards to two main factors: the first is that they can be issued on the spot in bank branches and reach consumers immediately, allowing them instant access to funds and cutting back significantly on mailing costs, delays and possible risks. The second reason is that 98% of plastic cards are processed electronically; thus the need for embossed debit and credit cards has practically been eliminated.
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