Its always nice when someone gives you a gift. Over the past few years, more people have

Itʼs always nice when someone gives you a gift. Over the past few years, more people have been showing their appreciation by giving gift cards, often prepaid plastic cards issued by a retailer that can be redeemed for merchandise in the store or online. The best-selling single item for more than 80% of the top 100 U.S. retailers, according to the website GiCardUSA, is their gift cards.

What could be more simple and useful than allowing the recipient to choose what they want? And isnʼt a gift card more personal than cash or a check? 

Yet a number of firms are now making a profit from the fact that gift card recipients are often willing to sell their cards at a discount — sometimes at a fairly sizable discount — to turn them into cold, impersonal dollars and cents. Meanwhile, other people are willing to buy those cards, and turn them into goods they want, at a discount.....

QUESTIONS FOR THOUGHT
1. Why are gift card owners willing to sell their cards for a cash amount less than their
face value?
2. Why do gift cards for Walmart sell for a smaller discount than those for the Gap?
3. Use your answer from Question 2 to explain why cash never “sells” at a discount.
4. Explain why retailers prefer to reward loyal customers with gift cards instead of rebate
checks.  

5. There are now laws restricting retailers’ ability to impose fees and expiration dates on their gi cards and mandate greater disclosure of their terms. Why do you think Congress enacted this legislation?