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Gift Cards As Complementary Currency



Been continuing to read and think about alternative or complementary systems of currency. Still ciphering out the usefulness of it all on an individual and community scale: what are the benefits of alternative systems of currency? The basic answer to that question which keeps coming up is that small scale community-based systems of currency allow you to retain value within your community. That is, if you have a system of currency which is limited to your neighborhood or your city, then you have a decent way to keep money within your community: simply because it cannot realistically be spent outside your community. So you don’t end up with money flowing out of your community into gigantic international corporations.

The only catch to all of this, of course, is that literally anyone can apply these concepts: even if you’re a gigantic international corporation. Though we rarely look at them in this way, a corporation is really nothing other than a shared value community: a group of people united around a particular thing which to them is valuable. Complementary currencies are a way to preserve value within your community. If your community is a giant corporation, you can issue complementary currencies to make sure that you don’t lose money.

In fact, you see this all the time with the rising trends of gift cards - the modern descendant of gift certificates. A gift card acts like a debit card, almost, except you can only use it to buy things at the store from which it originates. Therefore, it is a system of alternative currency, preserving value within the shared value community of the issuing corporation. People sink money into the corporation to buy gift cards, and even if they are never redeemed for products by the consumer, the money remains in the corporation. Many gift card issuers also have restrictions on getting cash back from purchases: so you end up with tons of gift cards which have small amounts of value left on them which is never redeemed. On top of that, you can set an expiration date on a gift card: so that this value automatically and legally reverts back to the issuing corporation if it is not used within a certain time frame.

It’s genius, really.

A friend of mine recently got, I think, a hundred dollar rebate on a Cingular purchase. Cingular sent him two gift cards as his rebate, each for $50. Unlike traditional gift cards, these ones act more like debit cards, in that they can be used at a variety of stores. I’m not entirely sure of the details, but I know they have been a hassle to use. Even though they look and act like debit cards, many store’s finance systems are not equipped to deal with them. Thus, you have the peculiar situation of having money to spend which no one will let you. Money which eventually goes away when the cards expire.

A brilliant, brilliant scam. And another training wheel on the great vehicle being prepared for us of a cashless society. (More about that in a moment).

We can sit around and accuse corporations of scamming us all we want, of course. But it won’t take us anywhere new or useful. On the other hand, if we look at what corporations are doing with gift cards as alternative currencies to preserve value, we can begin trying to apply these lessons to preserve and enhance value within our own communities. And that to me is a very exciting possibility.







15 Reader Responses

  1. Tim Boucher Says:
    October 15th, 2007 at 10:22 am

    On cashless society and Cingular rebate cards

    http://www.forbes.com/2006/02/11/cashl...-cash_cx_em_money06_0214cashless.html
    http://www.gripe2ed.com/scoop/story/2006/2/17/01751/6504

  2. speedbird Says:
    October 15th, 2007 at 10:24 am

    Keep money within your community. Oh yes. Which is why I’m quite willing to pay a premium for local produce.

    In the cashless society you’ll only be able to spend money in approved stores. You won’t be able to give it to your mates.

    Ever noticed how when you pay chip and pin it’s made very clear that the transaction isn’t between you and the shopkeeper, but between both of you and the machine?

  3. Cash In A Cashless Society - Pop Occulture Says:
    October 15th, 2007 at 10:29 am

    […] {Following up on my article about gift cards as complementary currency.} […]

  4. speedbird Says:
    October 15th, 2007 at 10:35 am

    What’s to stop local firms issuing gift certificates, redeemable in the community? Presumably there’s something that makes this illegal to prevent local currencies arising. I mean, say a firm is produce rich but cash poor. So one day it pays its staff partly in vouchers redeemable for produce. Like payment in kind but deferrable. Suppose an agreement is made that other local producers would accept the vouchers, and that to prevent the craziness of inflation due to the random printing of ‘money’, the vouchers are set to depreciate. Isn’t that then a local currency? Which is presumably illegal. So where is the line drawn? Why are stores vouchers legal?

  5. Tim Boucher Says:
    October 15th, 2007 at 10:36 am

    In the cashless society you’ll only be able to spend money in approved stores. You won’t be able to give it to your mates.

    See:

    http://www.timboucher.com/journal/2007/10/15/cash-in-a-cashless-society/

    Ever noticed how when you pay chip and pin it’s made very clear that the transaction isn’t between you and the shopkeeper, but between both of you and the machine?

    What is chip and pin?

  6. dan Says:
    October 15th, 2007 at 11:13 am

    I wonder if there is a way to scrape the $1.50’s or 43 cents or what have u off of these gift cards and pool the money into something that can be useful. For profit or charity. Sort of like the famous old accounting scam when moved to computer processing systems, where all extra fraction pennies on transactions rounded down were sent to an account to accumulate. Except legal, because the person who owns the remainder of money on the card needs to agree to give it over. Maybe a lottery.

  7. Tim Boucher Says:
    October 15th, 2007 at 11:29 am

    I wonder if there is a way to scrape the $1.50’s or 43 cents or what have u off of these gift cards and pool the money into something that can be useful.

    Let’s figure it out. What do we need to make it happen?

  8. Tim Boucher Says:
    October 15th, 2007 at 11:37 am

    What’s to stop local firms issuing gift certificates, redeemable in the community? Presumably there’s something that makes this illegal to prevent local currencies arising.

    I’m not sure there is anything illegal about this… It is the essence of what Ithaca Hours is all about

    http://www.ithacahours.org/
    http://en.wikipedia.org/wiki/Ithaca_hours

  9. Tim Boucher Says:
    October 15th, 2007 at 11:42 am

    http://www.strike-the-root.com/3/pre/pre2.html

    An infusion of local scrip into a community’s economy can ameliorate, as could no other instrument, crippling cash shortages due to unemployment, under-employment, personal financial distress and bankruptcies, once again establishing liquidity and equity in our local financial transactions.

    But is local scrip a legal tender, you ask? According to the experts, local currency provides a completely legal, debt free and people friendly means of exchange, serving only the needs of the local community.

    In “Rethinking Our Centralized Monetary System,” law professor Lewis Soloman states, “There is no legal prohibition to local scrip, community currencies or private exchange systems in the United States. The fact that there have been no challenges to the systems already in operation support that finding. Taxation operates under the same fundamental rules of trading with the national currency.”

    “They’re like Disney Dollars,” says Betsy Holahan, a spokesperson for the Treasury Department. “There is no requirement that businesses must accept U.S. currency.”

  10. Tim Boucher Says:
    October 15th, 2007 at 12:05 pm

    http://en.wikipedia.org/wiki/Private_currency

    In the United States, the Free Banking Era lasted between 1837 and 1866, when almost anyone could issue paper money. States, municipalities, private banks, railroad and construction companies, stores, restaurants, churches and individuals printed an estimated 8,000 different monies by 1860. If an issuer went bankrupt, closed, left town, or otherwise went out of business the note would be worthless. Such organizations earned the nickname of “wildcat banks” for a reputation of unreliability; they were often situated in remote, unpopulated locales said to be inhabited more by wildcats than by people. Yet according to Lawrence H. White’s article in The Freeman “it turns out that ‘wildcat’ banking is largely a myth. Although stories about crooked banking practices are entertaining—and for that reason have been repeated endlessly by textbooks—modern economic historians have found that there were in fact very few banks that fit any reasonable definition of wildcat bank.” The National Bank Act of 1863 ended the “wildcat bank” period.

  11. speedbird Says:
    October 15th, 2007 at 3:36 pm

    Chip and pin: in the UK, when you present your bank card and instead of handing it over the counter you put it in a little machine which then asks you for your private ATM code. I find this transaction weird: both parties bow down before this little black box and rarely look at each other. I assumed the US had invented it ;-D

  12. dan Says:
    October 15th, 2007 at 5:31 pm

    Let’s figure it out. What do we need to make it happen?

    I’ll check out what’s possible.

  13. Tim Boucher Says:
    October 15th, 2007 at 10:34 pm

    Oh yeah, they have those boxes in the US, but I’ve never heard anybody call it that!

    Dan, let me know how I can help - one of the things I’m good at is finding other people who can help too by finding people who are excited about certain ideas and values…

  14. John Rogers Says:
    October 18th, 2007 at 11:32 am

    Irving Fisher, a leading US economist of the early 20th century, told President Roosevelt in 1933 that the local ’scrip’ currency, legally issued by department stores and local governments right across the US, could “get the US out of the Depression in 3 weeks”. Roosevelt, concerned to stamp his authority with centralised solutions, went for the New Deal instead and outlawed all of the local systems at that time. A little know history - see Bernard Lietaer’s visionary book ‘The Future of Money’ for the full story. And a great What If? of history.

    Back to the present, we have had two decades of experiments worldwide with community currencies (CCs) on every continent in many different social and economic settings. They work. They keep wealth flowing locally, they help people make new friends, rebuild community spirit and stay sane. Many have failed due to poor design.

    I am currently writing a community currency design manual which suggests that there are five areas that currency designers need to pay attention to in designing sustainable CCs: Operating Environment, Governance, Management, Functions & Services provided and Participants. When we design for all of these then we will have more successes than failures and begin to see more CCs really flying.

    For more resources and to stay in touch with my work go to: www.valueforpeople.co.uk

    Best wishes

    John Rogers

  15. Creditz: “The World’s First Digital Currency” [bullshit] - To[p oBcultu]re Says:
    October 29th, 2007 at 2:23 pm

    […] Contrary to what they claim on their website, Creditz (talk about an abyssmally stupid brand name!) is simply *not* the world’s first digital currency. Not even close. The only thing which is KIND of cool about this system is that it will allow you to transfer value between entirely different systems of currency. I wrote about these issues here and here with relation to gift cards as complementary currency. […]



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