by Donna M. Airoldi | February 16, 2011

In an effort to generate a new income source, the U.S. Postal Service (USPS) is expanding into gift cards.

The Postal Service notified the Postal Regulatory Commission last month that it will begin testing the gift-card market on or after May 1, 2011 with open-loop cards—in both fixed and variable amounts—that will be branded by large electronics payments companies, e.g., American Express, Discover, MasterCard, and Visa.

According to the filing, the cards sold will be either the standard cards offered by the supplier(s), or customized, co-branded cards featuring Postal Service imagery, such as stamp art or the USPS corporate signature.

The Postal Service indicated it also might test the sale of closed-loop cards for specific merchants, though no plans have been established as of this date.

Currently, fixed cards will be valued at $25 and $50; variable cards will have minimum/maximum allowed values of between $26 and $100. The Postal Service also intends to set a $500 daily maximum face value of cards purchased per customer, and a $3,000 weekly maximum face value of cards purchased per customer.

Initially, the cards will be available only at Postal Service retail windows and will not be sold at Automated Postal Centers (APCs) or on USPS.com. A card will be activated by a retail associate upon purchase, with funds available immediately.

The test is planned for two years at the Postal Service’s nearly 2,000 locations that already sell greeting cards. The test will then expand to up to 3,000 additional locations in October 2011 to capture holiday sales.

Additional revenue will be generated through retaining a negotiated percentage of the activation fee paid at the time of purchase. Initially those fees will be: $3.95 for a fixed $25 card; $4.95 for a fixed $50 card; and $5.95 for a variable card.