Consumers gain gift card leverage

The proverbial gift card dilemma: use a gift card to make a purchase; then dump it with the remaining balance into a purse or wallet, where it remains indefinitely, forgotten and unused. But Irvine, Calif.-based Leverage Inc. has devised a Web site that allows users to manage their existing gift cards, as well as purchase closed-loop, private label gift cards online.

Leverage's Web site, www.leveragecard.com, has the functionality of a supermarket gift card kiosk. Almost 100 different retailers offer gift cards through Leverage, including Amazon.com Inc., Subway, Foot Locker Inc. and Lowe's. Customers can purchase virtual, electronic or physical gift cards. They can also realize new benefits by registering existing cards.

Leverage doesn't just benefit the consumer. It assists retailers as well by offering them another venue to sell gift cards and advertise their products.

Developed by Mark Edward Roberts and Jennifer Mathe as a way for consumers to more effectively manage gift cards and prevent their loss and theft, www.leveragecard.com is seen as a one-stop gift card shop. Gift cards purchased from the Web site have a financial reward tied to them of 3.65% interest. Cards not purchased from Leverage but registered on the Web site earn 1% interest.

Registrants are offered the ability to swap cards, manage balances, accumulate frequent flyer miles and loyalty programs, receive offers and savings from retailers, and view calendar information such as expiration dates. Protecting customer privacy is a main concern, and Leverage limits the collection and use of personal information.

According to a report issued by Packaged Facts, a market researcher for food, beverage and consumer packaged goods, the convenience associated with the purchase of gift cards is anticipated to increase the sales of gift cards by approximately $14 billion over the next five years.

Needham, Mass.-based consulting firm TowerGroup estimated that unredeemed gift cards totaled nearly $8 billion in 2006, amounting to almost 10% of total gift cards purchased.

In 2007, Consumers Union, the nonprofit publisher of Consumer Reports, conducted a study on the 2006 holiday season. Fifty-six percent of the study respondents received gift cards, but nearly a year later 27% of those surveyed had not used one or more of those cards. The report gave several reasons why the cards were not redeemed:

• 58% did not have the time to use their gift cards.
• 35% tried to use the gift cards but couldn't find what they wanted.
• 32% forgot they had them.
• 7% would not redeem their gift cards because the card was either lost (3%) or had expired (4%).

Gift cards lead the way in the $81 billion prepaid card market. Consumer concerns about extra costs and expiration dates may confine gift card growth, especially in the retail sector. But companies are beginning to remove certain fees and limitations from their cards to make them more desirable to consumers.

A company like Leverage may increase the growth and popularity of gift cards by providing a service that improves their use and convenience.

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