Gift cards — another fo­rm of plastic money — may be a useful item to offer to your near and dear ones or even to someone you want to please purely for business reasons. Th­at’s the unique Diwali gifting idea that several banks have floated.

In the past one week, two major banks — Central Bank and Corporation bank — came out with th­eir gift cards, joining the State Bank of India, ICICI Bank and HDFC that already have similar products on offer.

Central Bank chairman and managing director S Sridhar feels that the USP of gift cards is that it provides flexibility of use to the beneficiary.

“Gift cards are very convenient to use and this is why their demand is growing day by day,” Sridhar said.

Gift cards are prepaid cards supported by a magnetic strip that can be used at a number of merchant outlets across the country either for shopping, eating or for other purposes.

Most banks have tied up with payment gateways of Visa and MasterCard for this purpose. While the SBI has tied up with Visa for this purpose, Central Bank of India has done so with MasterCard.

Another banker said the gift card option goes a step further than another popular item — gift cheques. “Unlike a gift cheque, which has to be spent at one go, a gift cardholder has the flexibility to use part of it and save the balance for future,” said Corporation Bank general manager B R Bhat.

These cards are also transferable and could be gifted to anyone. These cards can be loaded with any value between Rs 500 and Rs 50,000. Some banks have also given the flexibility of re-loading the gift cards.

“The demand for gift cards has increased during the last few months and the festival season witnesses the maximum sale of gift cards. Many companies are also using it to gift their employees,” said a senior official of a private sector bank.

The gift cards come at a fee. Banks charge between Rs 50 and Rs 200 to issue gift cards. While the SBI is charging Rs 50, the HDFC Bank asks for Rs 100. There are discounts on the cards for bulk buyers.

It’s not just the fee, banks also gain due to the increase in low cost deposits by marketing the cards aggressively.

“Larger demand of gift cards also helps the issuing bank in augmenting its current account saving account ratio (CASA). Till the time a gift cardholder uses the card, the money loaded on it remains in our current account. This certainly helps us in augmenting our CASA,” Bhat said. The higher the CASA, the lower the cost of funds for banks.