My Uncle buys gift cards from coffee shops for his own use. He told me that it is very convenient because he goes to the coffee shop everyday and can just order his latte and charge it on the card. When the card runs out of money, he can just reload it with a credit card. All this did not really make sense to me at the time but I figured I should go home and think about it before I disagree with his theory.
After some thought about it at home, I still do not get it.
It seemed to me that paying with a credit card would give the same convenience that a gift card would. When I pay with my credit card at Starbucks, I do not even have to sign for my purchase. Other than the fact that I would get one transaction each time I buy a drink instead of one per gift card purchase, I really cannot see any advantages of using a gift card.
However, the disadvantages of buying the gift card means that I am prepaying for my purchase ahead of time. I am in effect giving out an interest free loan to Starbucks. What makes it even worst is that the loan documentation (the actual card) can be lost, making the loan non-collectible (Side note – Can I sue Starbucks for default on the loan?).
The other downside to buying a gift card (especially a Starbucks gift card) is that it indirectly makes you buy (drink) more. When we already prepaid for a gift card, we are much more likely to go into the store and purchase something because the money does not seem like it is coming out of our wallet.
There seems to be only downside and no upside. My question is – Do you buy gift cards for your own use too? Why do you do that??? Anything I am missing here? Any information would be great before I go bat some sense into my Uncle 🙂