With bank-issued prepaid gift cards surging in popularity this holiday season, TD Bank is selling its prepaid gift cards at face value.

The Toronto-Dominion Bank U.S. banking division said Friday that its Visa-branded gift cards are the only "free" prepaid Visa debit cards, which it is selling in any amount between $25 and $500. (Most banks charge fees in addition to the face value of their prepaid debit cards.) TD Bank is also throwing in a free gift box, ribbon, and greeting card for customers who purchase a prepaid debit card.

TowerGroup, an independent research firm owned by MasterCard Inc., said last week that sales of bank-issued gift cards, which are branded by one of the payments networks and can be used like other general-purpose payment cards, are expected to increase by 5.6% this holiday season.

But total gift card sales are expected to decline by almost 9%, driven by an expected 14% drop in sales of retailer-branded gift cards, which can be used only at specific merchants.

Brian Riley, a research director at TowerGroup, said in an interview last week that weak consumer purchasing power and the bankruptcies of some retailers have damaged consumer faith or interest in retailer-specific products. "People tend to have a lot more confidence in bank products … the acceptance is so much broader when you're not linked" to a specific retailer, he said.

Though "gift cards still play a very significant role in gift-giving," Mr. Riley said, in the current environment a bank-issued gift card "gives you the ability to shop for more practical goods" like groceries.

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