Does a gift card count as a credit card?

Do Gift Cards Count as Credit Cards?

Bank gift cards often bear the logos of payment networks like Visa or MasterCard. This grants them the protection of the Credit CARD Act, enabling their usage at any affiliated establishment. However, it’s important to note that gift cards are not the same as credit cards.

Key Differences:

• Credit: Credit cards allow you to borrow money up to a predefined limit, which must be repaid later with interest. Gift cards, on the other hand, are preloaded with a set amount and do not involve any credit.

• Revolving Balance: Credit cards have a revolving balance that can fluctuate based on usage and payments. Gift cards, however, have a fixed value that decreases as they are used.

• Interest: Credit card balances accrue interest if not paid in full by the due date. Gift cards do not incur interest charges.

• Late Fees: Credit cards may impose late fees for missed or delayed payments. Gift cards do not carry any late fees.

• Overdraft Protection: Credit cards may offer overdraft protection, which automatically draws funds from another account if a transaction exceeds the available balance. Gift cards do not provide overdraft protection.

Safeguards of the Credit CARD Act:

The Credit CARD Act provides certain safeguards for gift cards:

• Unauthorized Use Protection: If a gift card is lost or stolen, the remaining balance can be replaced.
• Expiration Date: Gift cards cannot expire within five years of purchase or activation.
• Fees: Gift cards can only charge fees for certain activities, such as balance inquiries or replacements.

Conclusion:

While bank gift cards adorned with payment network logos offer similar protections to credit cards, they are distinct financial instruments. Gift cards are preloaded with a fixed amount, do not involve any credit, and have no revolving balance. They are also subject to different regulations regarding interest, late fees, and overdraft protection. Therefore, it is important to understand the differences between gift cards and credit cards before using them for transactions.