October 27, 2007

US Bank Issues 20th Millionth Gift Card

On October 25, US Bank stated that it has issued its 20th millionth gift card, doubling the number in slightly over one year. Last July, US Bank issued its 10th millionth gift card. This pace solidifes US Banks as the top Visa gift card issuer.

US Bank fees for a Visa gift card are as follows:
$4.95 to purchase/activate a gift card via a branch office.
$6.95 to purchase/activate a gift card online, excluding shipping.
$2.50 monthly maintenance fee at the first six months.
$0.50 per call after the first two calls to automated phone service to check balance.
$1.00 per call to live customer service representative for assistance.
$15.00 to replace lost or stolen card.
$15.00 to cash out remaining balance on expired gift cards.
3% of transaction amount for foreign transactions.
Gift cards are not reloadable and can not be used to withdraw cash from an ATM.

Interesting enough US Bank is also one of two banks that issues Simon Mall gift cards for Simon Property group. The only major differences between Simon and US Bank Visa gift card are the following:
$5.95 handling fee.
$2.50 monthly maintenance fee after the first 13 months.
$5.00 to replace lost of stolen cards.
Does not offer phone balance inquiries.

Based on the fees outlined above, lets assume US Bank generates $4.95 in revenue per card. This translates to approximatley $50 millions in revenues just for selling Visa gift cards. If the other fees are taken into consideration, the revenue generated goes up considerably. In addition, roughly 10% of all gift cards are never redeemed, which is even more profit for them.

U.S. Bank Issues Its 20 Millionth Gift Card

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Comment now » | Posted by Alex | Filed under: Analysis

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