brian on 2009.03.14
at 01:39 am
You’ve probably seen them by now, a gift card that’s not to a particular store or restaurant, but bears a credit card logo (like Visa or AMEX) and can be spent where ever credit cards are accepted. A strange new thing. Personally, I’d suggest giving cash or a check, because they don’t have the strings attached. But I’ll talk about the pluses and minuses of gift and gift/credit cards at the end.
When you use one of these cards at a restaurant or a gas station, you could have big stumbling blocks. We did, this evening, with one. Here’s why. When you use a credit card at a restaurant, they first take the card, swipe it through their machine and put a hold on your account, then they bring you a receipt which you sign, add a gratuity, then hand over, and walk off with your card. The restaurant then reopens the bill in the machine, adjusts the total to accommodate your tip, and the sale completes after you’ve left the premises.
This is where the problem arises. When the restaurant places a hold on your account, they do so for more than the total of your bill. Many times the machine puts a hold for 120% of your bill, to accommodate the possibility of a 20% tip. They’re effectively asking your bank, “Will this person be able to pay their bill plus whatever they’re going to leave us for a tip (an amount that we, the restaurant, don’t know at the moment)?”
If you’re using a gift credit card, you have a hard limit. We had a $50 card. We had a $48 dinner. Sweet, perfectly paid for! We just have to leave a cash tip! Not so fast. When the card goes through, the machine isn’t asking for $48, it’s asking for closer to $60. Which you don’t have. So what happens? DECLINED.
Chances are that the waiter running your card doesn’t understand that the credit card machine is checking for more than the bill’s value. It may be difficult to convince them of this. What the restaurant has to do, if they’re patient, which is unlikely, is run the card a couple times, each time low enough to avoid the overage. But each time a vendor runs a card, they’re charged for it. Multiple charges means less of your bill goes to the restaurant. They don’t like that.
You could convince the restaurant to skip the first step, running the card for a final charge only, like a retail store would. But this requires either a) a system that allows that, and/or b) someone savvy enough to do that.
We wound up getting our restaurant to get $30 off the gift card and we paid the balance on another, regular card. We tipped in cash. It was a royal pain in the ass for all parties involved. I had to call a bank to find out the trouble with the card. The restaurant had to run our card three or four times and be taught how credit cards work by me. It was probably a ten-fifteen minute or deal that nearly ruined an otherwise wonderful evening. We’re now left with a card that has money still left on it, that we have to go out of our way to use.
The only people who won here were the card vendor, and the company that gets paid to authorize credit cards for the restaurant. The restaurant and the customers had to deal with this pain in the ass process.
You may have a similar problem using the card at a pay-at-the-pump gas station. When you scan your card there, there’s a similar hold placed on your card, sometimes $50. The sale isn’t completed until after you’re done fueling. If they don’t check to see your account is good for a full tank of gas, how can they take the gas out of your tank if you can’t pay?
On top of all these customer-unfriendly ordeals, there are other problems with gift cards: if the bank goes out of business before you use your card, it’s worthless. If the bank goes into bankruptcy (a real possibility these days) your card is worthless. If the recipient misplaces the card or otherwise doesn’t use it for a certain amount of time, the card will lose value, through a “service fee.” It will eventually complete deplete.
If you’re thinking about giving one, think about these things first. If you get one, be sure to spend it, fast!
Posted in: Cool Info
jess said on 2009.03.20 at 03:23 pm
i had no idea. that’s great information that I will pass along. thanks for the illumination on my lunch break!
Sarah said on 2009.03.22 at 06:07 pm
what a pain!
What a pain in the bum! Thanks for sharing your knowledge. Corporations often give those cards as little thank you or happy birthday or goodbye gifts (seems more appropriate then giving an employee an envelope full of cash).
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