There’s always a lot of fuss this time a year about gift cards. Some people love them, and some people hate them. I’m sort of in the middle.
- On the one hand, I continue to believe that anything a big company wants you to purchase is probably not in your best interest. That is, if a mega-corporation is all fired up to sell gift cards, you can bet they’re a profit center, which probably means they’re rigged against consumers.
- On the other hand, gift cards are convenient. They’re easy to give, and they’re generally easy to use. There are many circumstances in which gift cards make great gifts.
I like to receive gift cards for certain stores. Over the past year, for example, I’ve accumulated $185 in Land’s End gift cards, and I wouldn’t be surprised to receive more this Christmas. I haven’t used any of them yet, though I’ve checked to be sure I’m not going to get dinged because of it. Sometime this spring, after my birthday, I’m going to have an on-line shopping spree — and it won’t cost me a dime.
Still, the critics have some valid complaints.
The problems with gift cards
Last week, my cousin reminded me of a gift card that Kris and I gave him a couple years ago. “It was a nice gesture,” he said, “and I know you meant well, but it’s not anything I’ll ever use. It’s been sitting on the kitchen counter for two years, and will probably be sitting there two years from now.”
That’s one problem with gift cards — here are some others:
- They expire. Some gift cards carry an expiration date. The recipient must use the card within a certain amount of time, or the card becomes unusable.
- They have fees. Some gift cards — especially those issued by banks — carry fees for various events. Some even charge to use the card. (In August, Tim shared how a gift card from Bank of America carried fees for checking the balance.)
- They can be difficult to use. Did you buy a CompUSA gift card for somebody this Christmas? Oops. CompUSA is going out of business — suddenly there’s a very real deadline to use that card. And what if you buy a gift card for somebody but the store doesn’t do business where the recipient lives? Not all gift cards are convenient.
- They carry an obligation. When you give a tie to your father, there’s nothing else he has to do use the gift. But when you give a gift card, your father must go to the store to use it. This often means that he has to spend additional money to find something he likes. Gift cards can force the recipient to spend money on his own gift!
Because of the potential problems, the U.S. Federal Trade Commission has issued a consumer alert on buying, giving, and using gift cards.
Using gift cards wisely
Despite the naysayers, Americans love gift cards. They love to give them, and they love to receive them. According to the December 2007 issue of the Consumer Reports Money Advisor, last year gift cards were the second-most popular gift to give. They were also the gift that women most wanted to receive. (They were number three on the list for men.)
According to both FTC and Money Advisor, there are few simple steps that gift card recipients can take to minimize potential problems:
- Read the terms and conditions when you receive the card so that you understand your rights.
- Register your card if it instructs you to do so. This gives you protection if the card is lost or stolen.
- Use the card as soon as possible. Unless you know that the card has no hidden fees or expiration date, make it a priority to use it. If you wait, you may be in for a nasty surprise.
- Report problems either to the company that issued the card, or to the Federal Trade Commission, whichever is appropriate for your circumstance.
The FTC also notes:
If your card expires before you’ve had a chance to use it or exhaust its value, contact the issuer. They may extend the date, although they may charge a fee to do it. Some merchants have stopped charging inactivity fees or imposing expiration dates, so it pays to check with the issuer to make sure you’ve got the most up-to-date information.
When giving gift cards, always include a copy of the receipt. Some card issuers require a receipt to replace a lost or stolen card. Also, do your best to research possible hidden fees or other nuisances (such as expiration dates).
Further reading
Lazy Man recently explained why he buys gift cards. He thinks it’s more acceptable to give a gift card than money, likes that recipients can pick their own gifts, and is happy that he can save a little cash when buying them. Jim at Blueprint for Financial Prosperity, on the other hand, doesn’t like them. Finally, Liz Pulliam Weston says that gift cards are not gifts.
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I’ve landed on both sides of the fortune coin with receiving gift cards – I had one for a nice restaurant that I used easily and happily.
I’ve also received one that I could never use, because after 4 hours of trying to activate the card, and being shuffled around by real people, literally passing the buck again and again, I finally gave up in frustration. When I got back around to trying again a couple of months later (we were moving at the time), the card company got to keep my $100 dollar gift because it had expired. Nice scam.
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[...] Rich Slowly personal finance that makes cents « The Pros and Cons of Gift Cards | [...]
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I recommend against giving them to kids. It forces the parents to take the kids to a store, a time-consuming hassle. And as you point out, the item you pick often costs a different amount than the gift certificate. So either you’ve got a gift certificate with a few dollars left on it which clutters up your life, or you have to make up the difference.
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My sisters, brothers-in-law and I have no problems with the giftcards we give each other because we purposefully tell each other where we plan to be shopping for items within a month or two of Christmas.
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Most gifts cards are lame..
They force people to shop at a particular store… it’s almost impossible to use the exact amount on a card… So, you either have to spend a little more than was on the card, or a little less… EITHER WAY, the gift card company wins!!!
The only time this isn’t true would be a gas card or one of those x-box points cards, type deals…
NCN
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I love gift cards for two types of people: someone with a similar Starbucks addiction as I do and teachers. A $5 Borders gift card seems to be very appreciated by teachers. I do encourage my kids to make gifts for their teachers — usually a Christmas tree ornament that only clutters up their life for a few weeks a year — but a $5 gift card is a nice thanks, especially for teachers the kids don’t see that often (like the gym teacher) but want to say thanks to.
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Very nicely put, Sarah.
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While I would prefer to pick out a gift, my kids, nieces and nephews would prefer gift cards. One in college has asked for a gift card to Trader Joe’sor Crate & Barrel, another wants one from a local upscale mall. I’ve got to admit, it took a lot less time to fulfill those requests, but it wasn’t as much fun.
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Just popping in to say something, no time to read ALL the comments, so sorry if this has been addressed:
No matter how you feel about GETTING a gift card, if the person has ASKED for it, feel free to give it. It’s their gift. You’d get them product X if they had asked for it; this time x = gift card.
Also, there is nothing wrong with giving gift cards as long as they are NOT a cop-out. The $5 gift card to Burger King that i never go to, is a cop-out gift from my relatives; but a $30 gift card to the local grocery store i go to from my ma is NOT, because i need food! She knows i love to cook, and I’ve always preferred USEFUL gifts over frivolous ones. I really hate giving/getting consumables as a gift, always feels like it’s a waste of money; but food is something you’d have to buy anyways.
In addition, if you know someone is tight on money, a gift card is a way to help out that person without having to make a big public statement about giving them money to help them out. When i was living pay-check to pay-check after my accident, the gift cards to Target i got let me buy the toilet paper and soap that i needed, without having to acknowledge to all of my relatives how little money i had right then.
Please, just get off your high-horses, people. Gift cards are often the best choice for a gift.
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[...] The Pros and Cons of Gift Cards I actually like gift cards as a gift in some ways – I usually end up using them pretty quickly. I do recognize, though, that a well thought out gift is the best option of all. (@ get rich slowly) [...]
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Allen, I don’t think most people here would disagree with your sentiments. Gift cards to places where the recipient shops regularly are basically the equivalent of cash. Gift cards to places where he doesn’t shop are a white elephant.
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After struggling to use some Discover gift cards we got at a mall promotion and fighting with the split transaction issue, I would tell people to avoid gift cards with credit cards like Visa, MC, and Discover. If I go to Borders with a $20 gift card, and the total comes to $21.50, I can pay for it with the gift card and cash (or even a credit card). But with a Visa/MC/Discover gift card, the transaction is denied due to an over limit.
So, since I had 5 of these gift cards, I have now 5 cards that I have managed to get down to less than a dollar, but that little bit left over will go back to the credit card company since most merchants won’t do split transactions.
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I have read a lot about picky teenagers and why you give gift cards in the comments. I am sorry, I think giving them a gift card is a cop out. Kids should learn to accept gifts nicely. If you always give them cash they won’t learn how to accept a gift. Then you end up with people like my sister-in-law in your family, making piles in front of you to take back to the store because she wants the cash instead. Needless to say no one likes buying her a gift anymore. I understand this is an extreme case, but you can see how parents giving into picky teens can lead to this.
This year, I banned myself from giving any gift cards and it was hard. I learned I needed to get to know some of my in-laws a bit better. On the plus side, I stayed well under my budget. Since a dollar amount isn’t on the gift and the gifts are all nice, thoughtful and not cheap looking, people don’t know my budget for them was $25 or less.
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Giving cash on mutual gift-giving holidays like Christmas is tacky because you’re counting on the other person *not* to give you cash. If you give your brother $50 and he gives you $50, that’s just the same as if you hadn’t exchanged gifts at all, and where’s the fun in that? By giving cash, you’re assuming that he’ll put more thought into his gift than you did into yours, and that’s kind of a rude assumption to make.
On the other hand, cash can be an appropriate and appreciated gift for occasions like graduations or children’s birthdays, where the recipient isn’t going to be giving you something in return.
As others have mentioned, gift cards for experiences like restaurant meals, that can’t be wrapped up and put in a box, can be good gifts. And if the recipient had to travel to visit you, it can be better to give a gift card than to give a bulky, heavy, or fragile gift that they can easily get at a store near where they live.
And surely my family isn’t the only one that does a “grab bag” gift exchange, where you’re not shopping for a specific person. Gift cards are good choices for those too.
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Interesting how many commenters here complain that “giftcards are so impersonal.” I’m not disagreeing, exactly. But there’s something about requiring everyone to exchange gifts on a certain day of the year that makes it challenging (to put it lightly) to come up with something “personal” for everyone. Maybe gift cards are just a symptom of how annoying “OMG XMAS!!!11″ is getting. We all feel obligated not to “forget” anyone on our list, but that means a lot of work doing something that many of us both do a lot and hate a lot — shopping. If I could have one perfect gift for Christmas, it would be someone else doing all the damn (grocery, cleaning supplies, household goods, grocery, socks and underwear, school clothes, and did I mention grocery?) shopping for me for the next 6 months.
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To follow on Fecundity’s and AHT’s comments, an appropriate gift card can be really cool. If you know a friend is saving for a specialty item (riding boots, say, or a prom dress) then cash or a gift card for the appropriate store with a note (“This is for your new tires”) can be really helpful.
I also use gift certificates for local small businesses I want to support. I’ve given certs for a massage at the local spa or for $20 at the local metaphysical bookstore. Naturally I only give these to locals who will want to make use of them!
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Love gift cards. Love cash too. My aunt always gets a book store gift card from her business partner for Christmas, and she gives it to me, still in the insert that says to J… from S… (their names). I just find that amusing, and I am really grateful that she passes them on to me. I have used a generic american express type gift card when buying something for my brother — he wanted some kind of electronic something or other, and since I live outside a small town far away from any electronic stores, and I didn’t even really understand what the thing he wanted was, let alone try to pick out an appropriate one, I just got the card and told him to buy the item, which was very satisfactory for both of us (FAR better than my driving to the city and buying something and then him having to return it because I didn’t know what I was doing). I have used gift cards for baby showers where I didn’t know what things the person had or was going to receive, and where I knew what store they liked to shop at. I have used them for my husbands nieces and nephews whom I do not know very well. Last year, I asked them whether they would rather get presents, gift cards, or cash. They all said cash. Hey, I remember being a teenager and getting excited when someone put five bucks in a birthdat card. So this year, cash it is.
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Star Money Articles for the Week of December 10…
Here are some recent interesting posts from the MoneyBlogNetwork and beyond: Blueprint for Financial Prosperity says it’s time to buy a house. No Credit Needed is reviewing 2007. Get Rich Slowly covers the pros and cons of gift cards. Consumerism…
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[...] some more articles check out this pair of articles from Get Rich Slowly, and this great article from Mighty Bargain Hunter, which fleshes out [...]
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[...] in Home Depot gift cards. My mom and dad also gave us a large sum of money on a Visa Gift card (beware the fees!) so we could get one of several larger items we need. Because of this, we’ve eliminated our [...]
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[...] The Prosperous Peasant by Tim Clark and Mark Cunningham. I actually won this one over at the Get Rich Slowly blog. If you haven’t read what J.D. has to say, you ought to take a look. He gets into [...]
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Saved for a big screen TV.
After finding out my banks savings account rate was less than 1%…..I decided to load $20.00 a week( every Saturday ) on a WalMart reloadable giftcard.
After a year…I had enough to buy my TV.
I figured if my circumstances had changed during that year…I could always purchase food, clothing and gas to live on if need be.
Just a suggestion…
It worked for me;-)
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Use ‘reverse credit’ to stick to your budget…
This post comes from J.D. Roth at partner blog Get Rich Slowly. Ralph sent me an e-mail recently describing a clever budget trick he picked up from a friend: My wife and I had dinner last night with a couple of young women we know. We talked a littl…
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Great article. Gift cards are a $90 billion a year reality now, so we have to learn to live with them. We will all get one or more at some point.
I was so annoyed at not being able to get the last 5 bucks from my Visa gift card (no merchants would allow me to use the card with another form of payment) that I created a service (www.cashfromcards.com) specifically geared towards allowing people to drain the remaining bucks from their cards. Sorry for the self-promotion, but I created this service because I felt passionate about leveling the playing field and want people to know about their options.
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