Question

Suppose you hold a gift card, good for certain products at participating stores. Is this gift card money? Why or why not?

Short answer

The gift card is not money since it does not fulfil all the functions of money and is not a legal tender.

Step-by-step solution

The gift card is not money

For anything to act as money, it must be accepted as a medium of exchange by all and should act as a measure and store of value. This gift card is accepted only at selected stores and cannot act as a measure and store of value. It can only buy certain products.

Suppose the card is worth $100, but you need to buy something worth $75, and you do not want anything else for $15, you cannot use the card as you need to redeem it in full for $100. On the other hand, the card has a fixed value, and it is applicable for a certain period only; thus, it cannot act as a store of value.

Moreover,it must be a legal tender for anything to act as money. That is, the government must recognize it as money. Since gift cards are not legal tender thus, they cannot act as money.