Good News for Businesses Who Want to Offer Gift Cards Usage is Up; New Federal Regulations Extend Value

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According to a recent research report, gift card usage is up. And new federal regulations will make gift cards more desirable for those wanting to use them. That’s two pieces of good news for businesses considering offering this valuable service to their customers.

Many merchants just assume that gift cards are only for the largest, national retailers

Businesses considering providing gift cards now have several pieces of good news that could help them make the decision to offer this valuable service to their customers.

First, after a slight drop in 2009, experts says gift card usage is increasing. According to a report from Javelin Strategy & Research, the end of 2009 began to see a marked increase. Moreover, it’s predicted that recovery will continue, with the gift card market potentially reaching $6 billion in the next four years.

“Many merchants just assume that gift cards are only for the largest, national retailers,” says Tony Norrie, General Manager for TransTech Merchant Group. “But any business can provide this convenience to their customers. Having the gift card option is an excellent marketing tool as well as solid revenue stream.”

Second, new Federal regulations make gift cards more desirable for consumers to use and to give. The “Credit Card Accountability, Responsibility and Disclosure Act (CARD),” which goes into effect August 22, stipulates that prepaid cards, gift cards and gift certificates cannot expire within five years of activation or unless the terms of the expiration are clearly disclosed. The law also bans dormancy fess, inactivity fees or service fees on gift cards unless there has been no activity in a 12-month period and the issuer clearly discloses all fees before the gift card is purchased. Fees are limited to one per month.

“There’s never been a better time to offer gift cards to your customers,” says Norrie. “The CARD act not only strengthens their lasting value, it will continue to enhance their image in the mind of the buying public.”

According to recent research, gift cards were the most requested holiday item for 2009. Eight out of 10 people said they included gift cards among their holiday shopping purchases because the cards are convenient. Two-thirds of all consumer surveyed have purchased at least one gift card. And 51percent of consumers who received gift cards reported they spent more than the card’s initial value. (Source: National Retail Federation)

TransTech Merchant Group, a direct seller of specialized and personalized merchant services, advises there are Six Reasons businesses can profit by selling gift cards:

1. It’s upfront money—advanced cash flow to your business. A customer pays for the card in advance, but redeems for products or services at a later time.

2. They build customer loyalty and help insure repeat business. If a customer buys your gift card, they will obviously return to your business to use that card.

3. Gift cards increase your customer base. Because many people buy gift cards to give to others, those who receive the card will likely use that card in your place of business. This gives you a new customer, as well as a chance at their future business beyond the value of the card.

4. They are an excellent “word-of-mouth” method of marketing. Those giving your gift card are promoting your business, helping to increase awareness of your products or services.

5. Studies show customers using in-store gift cards spend more than the face amount of the card.

6. Not all gift cards are redeemed and not all the money on the card is used, so that’s additional profit for your bottom line.

Gift card service can be implemented in almost any size and every kind of business with very little start-up costs and low monthly fees. The cards are personalized, and can be reprogrammed and reused. For more information, visit our website: http://www.TMG-360.com.

About TransTech Merchant Group
TransTech Merchant Group is one of the direct sales entities for Certified Payment Processing (CPP). TransTech is a full-service provider of electronic payment processing equipment for purchases made by debit and credit cards, as well as checks and online purchases, in addition to a range of other specialized merchant services, including gift cards. For nearly 20 years, CPP has helped businesses increase revenue while controlling costs.

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Bill Prickett, APR
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