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Happy Birthday, I Paid Your Phone Bill. Are We Having Fun Yet?

May 24, 2011

By Meredith Schwartz

This development was probably inevitable: now consumers can use unredeemed gift cards to pay bills, according to Auction Bytes.

Given the plethora of websites that already let people sell and trade unused gift cards, it's not a surprise that we've taken one step closer to the perfect rational system so beloved of economists.

And in the continuing not-a-recession where salaries have stopped even trying to keep pace with the increasing cost of frivolities like health insurance, I think we all understand the impulse to realize every last dime and apply them where they're needed most. For those who really need the money right now, I'm sure it is a blessing.

Unfortunately for the rest of us, who may be stretched but are not actually desperate, it also gets rid of the main benefit of gift cards over cash or checks -- the limitation to a particular retailer. At least if the retailer isn't Wal-Mart, that restriction carried with it a mandate to splurge on something non-essential; something the recipient wants but could not otherwise justify buying.

Plastic Jungle is betting that enough consumers consider that a bug, not a feature. However for others it was actually part of the value of the gift. Now that people will know they could pay bills with the card, even if they choose not to, the guilt-free aspect is lost. A gift card offered the gift of choice compared to a pre-selected present, but it also offered the gift of a limited choice.

That may sound weird, but if you think about it, specialty retailers are no strangers to the idea that limiting their customers' choices is a plus. When people opt for a boutique over an endless aisle, they are not only opting for better perceived value, displays or customer service. They are also opting for someone they trust to do the editing or curating for them, leaving them only a few good options to consider instead of an overwhelming array.

(We know this pays off for retailers, since studies have shown that too many choices lead to shoppers giving up and buying nothing; and in his book The Paradox of Choice, Barry Schwartz argues that it pays off for consumers too, because too many choices leads to anxiety and stress.)

If this gift-card-as-negotiable-currency thing catches on, there might, paradoxically, be a market for the reverse -- gift cards that are somehow tied to the original recipient. If they can't be sold or traded away, you really do have to treat yourself or let the money go to waste.

I'm not sure what kind of technology and/or legal finagling it would take to implement that. But if it comes to pass, specialty gift stores should be some of their first best customers.

In the meantime, if your customers need an extra boost to feel okay about spending their gift cards as they're meant to be spent, tell them to take it from Shakespeare:

O reason not the need! Our basest beggars
Are in the poorest thing superfluous.
Allow not nature more than nature needs,
Man's life is as cheap as beast's.
-- King Lear