Help me prove how bad AmEx gift cards are to my company!
January 19, 2010 1:30 PM   Subscribe

How do I convince my company that American Express gift cards are a bad idea?

My company gives small bonuses (approx $20 - $100) for Employee of the Month, winning the newsletter puzzler, etc. They used to issue checks, but now are switching to giving us American Express Gift Cards.

I've heard a lot of horror stories about these so-called "open loop" cards. (Unlike "closed-loop" cards that are issued by a retailer and only good at that store.) AmEx isn't charging a monthly fee anymore, but there is a fee to purchase. I've also heard anecdotal evidence that it can be hard to use the cards, particularly when you want to apply part of the purchase to the card and the rest with another form of payment.

Do you know of any concrete news stories (particularly from well-known newspapers and magazines) outlining the pitfalls of these cards? I'd like to present this information to HR in order to try to convince them to go with another option.
posted by radioamy to Work & Money (12 answers total) 1 user marked this as a favorite
Here is a link with various "horror stories" regarding recent issues with American Express gift cards:
posted by tomjoadsghost at 1:37 PM on January 19, 2010

My company gives us Amex gift cheques and uses reward points to buy them. The nice thing about them is that you can deposit them at a bank and they are as good as cash. They are also theoretically protected in case they are lost or stolen. Most retailers just don't know how to process the cards or check, which can turn into a headache for the person trying to redeem them. I'd suggest to your employer that you switch to the gift cheques, with the added bonus of being able to purchase with reward points (and thus saving your company some serious cash).
posted by katemcd at 2:14 PM on January 19, 2010

You could be super patriotic about it. Amex gift cards are generally a way for a company (and their employees) to avoid paying tax on bonuses.
posted by roger ackroyd at 2:15 PM on January 19, 2010

Response by poster: katemcd, that's an interesting idea.
posted by radioamy at 2:31 PM on January 19, 2010

roger ackroyd: "You could be super patriotic about it. Amex gift cards are generally a way for a company (and their employees) to avoid paying tax on bonuses."

That doesn't work. I once received an AMEX gift card as a bonus and had to pay nearly half of its value in taxes.
posted by mkb at 2:32 PM on January 19, 2010

You could point out that if the cards get used at small businesses, those merchants could lose as much as FOUR PERCENT of the transaction.
posted by vito90 at 2:32 PM on January 19, 2010

Or... if there are other employees that feel the same way you do, offer (or charge) to sell the gift cards on ebay.
posted by yoyoceramic at 3:20 PM on January 19, 2010

I received several last year and used them all without a problem including paying part on the gift card and part with another form of payment. I've also returned items purchase on card and been given cash back.

It's really not a big deal to use them.
posted by 26.2 at 6:04 PM on January 19, 2010

I've now received and used a couple of (non-AmEx) open loop gift cards. Both were Visa, but one was in the US and one was in Canada.

I've had no problems using either of them. The only challenge is to remember how much you have left on the card when you're getting low on balance. I suspect a retailer wouldn't want to retry time and again to get an authorization on your card, both because it's a time sink that takes away from other customers and because they're being charged by the network per request. If you can do the mental math though (or look up the credit amount before using the card), you should be fine.

I'm not giving a value (ha) judgement on whether these cards are good or bad, just that my anecdotes are positive ones.
posted by lowlife at 6:05 PM on January 19, 2010

Consumer Reports is not a fan, but no longer thinks they're crooks.

This doesn't apply to "open loop" gift cards, I guess, but in 1993, an economist discovered that the average $50 gift card "was valued by the recipient at between $35 and $43," which comes up in this oft-recycled article.

(Personally, I hate gift cards of all sorts and often forget to use them, which starts a cycle of shame and self-loathing. Thanks for the lovely gift!)
posted by purpleclover at 6:28 PM on January 19, 2010

Response by poster: vito90 - yipes! do you have a source for that?
posted by radioamy at 8:14 PM on January 19, 2010

vito90 - yipes! do you have a source for that?

In my small organization we hate taking AmEx cards, 'cause they charge a very high discount rate/interchange fee (the percentage of the total transaction that you pay as a fee to AmEx), compared to Visa/MC. Last I checked, our AmEx discount rate is around 3.85%, while for Visa/MC it's around 2.5% (we don't accept very many cards in a given year).

According to this source, the average such fee for AmEx in 2007 was 2.56%. But large companies, who process a lot of cards, can get the rate lowered, so the average for small businesses is much higher.

Personally, I have had good experiences with gift cards in general. For example, I just got a Visa gift card as a bonus from the landlord at my new place when I moved. It worked great as spending money, I got the complete value from it, and was able to use it as partial payment (paid cash for the remainder) at Target.
posted by gemmy at 9:43 PM on January 19, 2010

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