The Pros and Cons of Gift Cards and Prepaid Cards

Vector gift cards.

The universal appeal of cash makes it a popular gift choice for many, especially those that have put off shopping until the last minute. But consumers who want to gift cash for the holidays should also consider gift cards and general-purpose reloadable prepaid cards. If cash is lost, it’s gone for good; but many general-purpose cards are as widely accepted as cash and come with additional benefits.

When deciding between gift cards and prepaid cards, Consumer Reports offers the following information:

Gift Cards

Pros:

  • Merchant cards or payment network cards can be purchased at a drugstore, retailer or supermarket. They can also be purchased online and sent by mail to you or the giftee.
  • Extended Expiration. Federal law prevents cards from expiring for at least five years from the purchase date or from the last date any additional money was loaded.

Cons:

  • Merchant cards can only be used at the issuing retailer. If the company goes out of business, the card may become worthless.
  • Scammers can copy gift card codes while they’re still on the rack, then steal whatever money a gift-giver loads onto the card.

General-Purpose Reloadable Prepaid Cards

Pros:

  • Universal: Cards can be used wherever merchants accept American Express, MasterCard or Visa.
  • Reloadable: The recipient can add money to a card and continue using it to pay for purchases.
  • Fraud Protection: Many offer the same consumer protections against fraud loss as bank debit cards.

Cons:

Fees: You’ll typically pay a few dollars for a prepaid card at a store or online. But not all prepaid cards are a good deal; some have recurring fees that can use up the card balance.

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