Monday, June 04, 2007

Anatomy of a Gift Card (Commentary,

Next time you are at the supermarket, reach into your pocket and grab a few coins, or bring along an entire jar of saved change, because quickly counting your money is now easy and super convenient. Even if it is only one-dollar, use a Coinstar coin counting kiosk.

There is a 9% transaction fee [8.9-cents for each dollar]. But, if you choose to order an instant gift card from retailers such as Starbucks, there is no fee or interchange charge. A minute later, your Starbucks-branded gift card is ready for use.

Earlier today, I noticed several consumers charge their lattes on a credit card. What must the added interchange fees be, especially on such a tiny transaction? But, if you use the Starbucks-branded gift card, the interchange fee is zero. Even if you just use it to buy a newspaper. Nonetheless when you choose a bank electronic payment card, where the bank issuer and acquirer could often be the same entity, they are effectively, double billing the merchant, because the fee is the same even if just one bank is handing the entire transaction.