Stored-value cards are a hot item in incentives. How do they stack up against other options, such as merchandise and gift certificates? This article describes the advantages and pitfalls and provides a list of suppliers.

DEFINITIONS

Debit or stored-value cards are one form of pre-loaded incentive card, a phenomenon that's making waves in the incentive game. Another, of course, is the familiar credit card, which has been adapted to serve incentive programs. Both types of cards are used to award dollar values, which recipients can use to purchase everything from merchandise to travel or other services. Incentive companies offer the cards as part of a complete system, with tracking, promotion, and accounting.

There are, however, significant differences between the two types of cards. Only one incentive card issuer (Meridian) offers a pure credit card which the recipient can redeem at nearly any retailer. The risk here is that a person may overspend the award limit and go into debt. While other cards may have an affiliation with a credit card brand, such as Visa or MasterCard, they behave more like debit cards. The preset award limit is fixed, and no unsecured credit is issued to the recipient.

With debit cards, the award value is stored in the recipient's name, as though the recipient had opened a bank account and been issued an ATM card. (Actually, the awarding company has a group account, with individual numbers for each recipient.) In almost all cases, award value accumulates on an individual's card as the incentive program progresses.

At point of redemption, debit cards are similar to gift certificates (see Doc. 3060, Gift Certificates). With both, the incentive company issuing the cards negotiates with retailers to participate in the program, and recipients may go to any participating retailer to spend whatever cash value they've been awarded. The store or catalogue will let recipients supplement their award with cash, if a desired item exceeds the award value. But with debit cards there's never an issue of receiving "change" (in the form of store credit) when the item costs less than the award value. The unused value is stored and can be claimed later at the same store or at another participating retailer. To simplify the transaction process, some retailers have verification machines on site. Those that don't can call an 800 number to verify the awarded cash value.

ADVANTAGES OF PLASTIC

Research shows that flexibility, perceived value, and ease of use are key components of any successful incentive program, and these are the qualities that make the case for incentive cards. Whether you go with credit or debit, the cards offer the recipient a means of award redemption that's almost as straightforward as making a purchase with a regular credit card or bank debit card: Just a simple swipe at the register and you're done.

Major vendors offering cards give the recipient a wide choice of retail options for redemption, so the shopping possibilities are unbeatable. This is the principal advantage the cards have over merchandise, where offering hundreds of items is cost-prohibitive, and most gift certificates, which typically are valid only at a single store chain or catalogue. Also, the recipient can shop around to get the best price, enhancing the perceived value.

Other advantages of the cards concern the administration of the award program. Because the card systems are computerized, award levels can be tracked, and awards issued, almost instantaneously. Administrative costs are relatively low. You avoid the typical 30- to 60-day wait for certificates and the logistical difficulties of putting together merchandise choices and printing a catalogue. The whole program is streamlined, paperless, and nearly idiotproof. In addition, you have the potential for tracking the program more closely, getting instant feedback on how and where people are redeeming their awards. Most programs provide a toll-free number that recipients may call to check their standing in the "points bank."

THE DOWNSIDE

Ironically, the cards' success at offering many choices is what leads some incentive pros to be wary of them. Perceived value (trophy value) is a must for any incentive award. You want recipients to have a special feeling about their award and think of your company when they glance at the award.

But many argue that, by giving recipients the ability to go on a shopping spree and possibly buy a lot of insignificant items, the impact of the award can be diluted. The very act of pulling out a card to pay for a purchase may feel like any other retail transaction. Indeed, skeptics sum up the cards as being too "close to cash."

Card issuers are quick to point out that participating retailers and catalogues are carefully selected, so no recipient can buy groceries or gas with the cards. (The exceptions to this rule, of course, are the true credit cards). They also stress that, if you stay within the recommended guidelines for most incentive programs (3 to 5 percent of the recipient's gross pay), the award will be perceived as significant.

Another potential downside to the cards is the possibility that a recipient might overspend his or her limit before anyone catches on. Indeed, many retailers and catalogues participating in debit card incentive programs don't have verification machines and, especially during busy times, might process a transaction on faith. If that should result in an overage, the merchant would be liable, not the awarding company or the recipient.

FEES

Suppliers typically attach a set-up fee to their card programs and charge the actual cash value for the awards issued. Single-use gift certificates often can be purchased at a discount from face value.

TAXES

Awards issued on cards generally should be treated as income by recipients, with awarding companies issuing a 1099 form for the actual cash amount, if it exceeds $600. Companies that wish to offer "tax-free" awards can simply make up the difference in the recipient's pay or make other arrangements. Check with your accountant or incentive company.

MAJOR SUPPLIERS

The companies listed below offer incentive programs that use either debit or credit cards.

• American Express Incentive Services offers a full range of stored-value reward cards including: "universal acceptance" reward cards good virtually everywhere American Express Cards are welcomed, and "selective acceptance" reward cards good at specific locations. Options include online point balance inquiry, monthly statements mailed to award-earners, and custom-designed plastic. For more information, call 888-453-0150 or visit http://www.aeis.com.
  
  
• Access AdvantEdge™ Card. Bank One, a pioneer in specialty debit cards, offers infinite solutions for customizing and launching a debit card program. To learn more, call 877-800-8937 or visit http://www.accessadvantedge.com.
  
  
• Card Express, Inc. (CardEx) is a leading provider of Visa and MasterCard prepaid debit cards for consumer gifts and promotions as well as corporate gifts, incentives and recognition programs. Order your GiftCards online at http://www.cardex.com or by calling 1-888-GiftCard.
  
  
• Gift Certificate Center. GCC Purchasing Card (stored-value). Call 612-672-8600.
  
  
• Stored Value Marketing (SVM). Specializing in sales, marketing, distribution, and fulfillment of stored-value products, including the business-to-business arena. Having successfully launched the first prepaid fuel card, SVM is considered a pioneer in the marketing of stored-value products. Call 800-972-7481.
  
  
• Incentive Gift Cheque MasterCard. Incentive Gift Check Card (stored-value card through MasterCard), Omni Smart Card (customized-value card that can be used as a phone card, discount card, or as an information-tracking card for loyalty programs). Call Ayala Karsh: 310-457-5976 or 800-353-8550.
  
  
• Maritz Performance Improvement Co. Maritz Exclusively Yours American Express(stored-value, not credit). Call 800-551-5824.
  
  
• Olsen-O'Leary Associates, Inc. The Globe Power custom Debit Card (MasterCard) is an unlimited-use card. Call Harold Dunn: 800-888-8282.
  
  
• Marketing Innovators (MI) is a full-service incentive company. The MICHOICE MasterCard debit card offers numerous options: reloadable (with monthly statements) or stored-value debit cards; universal worldwide acceptance (MasterCard) or preferred acceptance programs. Call MI at 800-543-7373.
  
  
• AchievaCARD Incentive and Award Debit Card. Performance Systems Group offers the widest range of stored-value and debit card program options in the incentive industry. For more information call 800-462-3682.
  
  
• Ecount, the stored value experts, offer products ranging from incentives to compensation to specialized rewards. Their comprehensive programs provide corporations with the tools to influence and motivate consumers, employees and customers. More than 850 leading corporations, including one third of the Fortune 100, rely on Ecount. Visit http://www.ecount.com, call 877-ECOUNT-1.