Consumers Bear the Risk with Gift Cards
The chaotic holiday shopping season is in full swing, but many of us are still scratching our heads about what to get for some of the loved ones on our “nice” list. Sometimes it's hard to think of something heartfelt for the person who has everything or who has tastes completely opposite your own. In those situations, a gift card might be a great solution — you know what they like but don't know what they want, need, or already own.
There are many situations where a gift card makes sense. The following examples come to mind:
- A couple has a wedding registry at Target, and you want to let them pick out items they didn't receive after the wedding. This is particularly great if the couple will be moving — they can use their cards after the move.
- The gift you want to give is online in nature, such as music or e-book downloads. It's easier to give my young niece a gift card so that she can download books directly to her Nook, rather than handing her cash.
- You know it's your gift recipient's favorite store, and there is zero doubt that he or she would spend the money there, and then some, in the near future.
Even though there are some good reasons to consider them, it's important to understand that when it comes to retailer gift cards, the consumer bears the risk.
Fewer consumer protections
Gift card transaction volumes are expected to hit a $100 billion high in the U.S. market in 2011, according to TowerGroup's Gift Cards: Coming of Age in a World of Chaos report. TowerGroup found that through 2008, expired cards accounted for 52% of value loss; fees caused approximately 39% of loss, and lost gift cards accounted for 9% of total lost value. Thanks to Title IV of the Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, those figures have improved, eliminating most fees, but consumer protections still fall short in the following ways:
- Gift cards are anonymous in nature and offer no protections for lost or stolen cards. (Tip: When giving gift cards, include a copy of the receipt. Some card issuers will replace a lost or stolen card.)
- Consumers aren't as fully protected in disputes and billing accountability as they are with debit cards or even credit cards.
- Consumers risk total loss of value should a retailer file bankruptcy. (As J.D. once said, “If you own a gift card to a bankrupt company, you're basically a tiny creditor,” and you're last in line to get repaid.)
In addition, although the CARD Act and eliminated or extended expiration dates, some cards still expire, which means another risk of total loss of value — you might as well hand Best Buy $50 just for the heck of it.
Cards go unused
Gift cards are setup in such a way that the consumer loses if the card is lost, stolen, or expires. The money was spent up front, so the consumer bears all of the risk. But those aren't the only ways retailers can profit.
A Consumer Reports poll found that even though 46% of consumers bought gift cards and 15% had them on their own wish lists, one in four hadn't redeemed all of their gift cards almost one year after receiving them. Of those who had unused gift cards, 41% of respondents said they hadn't used the card because they hadn't found anything they wanted and 37 percent said they hadn't had time to use their cards. (I've had unused cards simply because I kept forgetting I had them. One that I received for Home Depot went unused for more than a year!)
Gift cards encourage more spending
Then there's the prepaid amount to consider. A recipient can either leave money on the card or pay more money to redeem the full value (a win for the retailer). I remember one occasion when I went into a store to redeem a $30 gift card. I found a pair of jeans on the sale rack, and reasoned that it was a “good buy” because they were on sale and I had a $30 card. It might have been a better deal than buying at retail price, but I wouldn't have spent anything at all if I hadn't been wandering the store looking for something to buy with my gift card.
It's rare that a purchase total will equal the exact amount of the gift card. The Consumer Reports poll found that 65% percent of adults who received a gift card spent more than the value of the card. Even if it's $5 more than the card's value, multiply it by how many cards are issued, especially for a big-box stores like Target and Best Buy, and it's serious profit.
Buyer beware
If you're considering gift cards for friends and family members, choose wisely. Pick a card you know they'll use because they already shop there frequently, or pick a bank-issued card that's valid anywhere, and check the expiration date and any other rules and regulations.
And if you receive gift cards you know you'll never use, don't let them go to waste. Consider one of two ways to put them to good use:
- Sell or trade them on a site like Card Avenue, Swapagift.com, or CardCash. You'll have to pay a fee and/or sell them at a discount off the value, but it's better than letting them collect dust in the bottom of a junk drawer. You also can try sites like Craigslist or Gift Card Cove which don't have transaction fees, but do come with higher risk because transactions are peer-to-peer.
- Donate unwanted cards to charity. Many nonprofit and charitable organizations accept gift card donations. You also can donate through Plastic Jungle, which gives you the option of giving the full value of your card to needy schools through DonorsChoose.org.
Also be sure to check out previous GRS resources on the pros and cons of gift cards and tips and tricks from readers.
Are you planning to buy gift cards this year? Do you like receiving them as gifts?
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What I hate is instead of giving cash or sending checks for rebates I’ve noticed a trend over the last few years of providing people with Visa or store cards with credit on them. To me their problems are no different than a gift card, anonymous, can be lost or stolen, etc., and often can’t just be put into the bank account directly but need to be “spent” to get your value out of them.
If someone is careless enough to lose the gift card, what makes you think that they will save the receipt safely?
I’m not planning on giving gift cards. I’m taking the risk of giving cash. I’ve sent gift cards in the past, but I realize I’m locking the person into using a particular store, or into spending at all. It’s possible the person would rather just save that $50 for a rainy day.
I’m not even using checks because that means people have to get to the bank to use it. That’s hard for some of my friends and family who don’t drive and bank at small banks that don’t have a lot of atms.
I call it “giving the universal gift card.” Who am I to dictate where someone spends their money?
and on the flip side, I’ve bought several discount gift cards this year to buy presents for family at retail stores. The temptation of course is to go overboard and buy more cards just because they’re such a good discount. I knew we wanted to get the Nook tablet, so I got B&N cards that would cover that amount only and saved about 13%. April, you failed to mention the new trend in gift cards: registration and rewards, just like a credit card. Starbucks is really on the ball with this one. Also it is green because you keep your… Read more »
Gifts can be tough. I personally would much rather get cash than a gift card. However, I *feel* that others would rather receive a gift card than cash. I sometimes ask how we arrived here as far as gift giving. I imagine a simpler time not long ago where people gave actual gifts to people and picked them out or even made them for the person receiving the gift. It seems like a nicer time in my mind. But I also know that many of us give gift cards now so it clearly must be better than the reality of… Read more »
I’m still one of those people that gives actual gifts, either ones that I’ve purchased, or gifts I’ve made. To me, giving cash and gift cards takes the joy out of giving.
Me too! One of the joys of giving is to make something just for them (my go-to wedding gift is a hand-made throw blanket), or sharing something they might not get on their own. I’ve shared TV shows I like with my friends that enjoy well-scripted and well-produced series, books from authors I like with bookworms, etc. I also get clothes for my mother that fit me well since we have the same body type. She might not be as willing to splurge for herself on higher quality stuff, but I know what she likes. I’m getting married soon, and… Read more »
Gift cards combine the laziness of getting someone cash with the self-centeredness of telling them what to spend it on.
This comes off as a little rude, but it still made me laugh 🙂
I think #29 ru below substantiates your opinion.
It’s a way of giving socially obligatory gifts to people you don’t know very well with a veneer of intimacy and thoughtfulness.
i’ve been asking for checks-not-gift-cards this year. it takes a while to dance around the semantics of it, but i hope it works. grandmom was right on this one- checks are the best. after my wedding, my husband and i had a few hundred dollars in gift cards (still a lot remaining, actually). it was a pain to try and spend them- they weren’t accepted anyplace online or on the telephone. haha that seems very minor now but at the time i was like GO TO THE STORE LIKE SOME KIND OF LUDDITE DINOSAUR? what year is it?? we eventually… Read more »
I feel pretty awkward when I ask someone what they’d like and they say “cash” (or a similar answer, like a check). How do I know what the “right” amount is to give them — something that won’t insult them as being too low but won’t exceed my budget? I much prefer it if folks suggest items they want or need. I can understand that if people normally give you gift cards, you might suggest a check this year instead, but if I ask someone what they want for Christmas, I don’t want $ to be one of the answers.… Read more »
Ugh, my family used to do that too, exchanging equivalent cash presents at birthdays. Our solution was going out for birthday meals, with everyone paying their own way, rather than giving gifts for the sake of giving gifts. The birthday person (or people in some cases) got to pick the place.
If I asked someone what they wanted for Christmas or a birthday, and they told me “cash” I would: A). Respect their honesty B). Hope they would understand when I decided instead to give them nothing at all. I’m not talking about cases where the person is destitute and cash is truly needed. I’m talking about people who are so self-centered that they fail to realize that a gift should carry meaning for both the giver and the recipient. Saying “give me cash–I want to use it to buy a new TV” (for example) reduces the giver to the status… Read more »
I don’t think it would bother me that much. If my sibling said “my kid has enough toys, but we would appreciate a contribution to his education savings”, that would be fine with me. If my friend is saving up to buy an iPod, that’s cool too. I’m happy to be a part of their larger goals, and that’s meaningful to me and then.
To each his own, though! What works for me and my social circle doesn’t work for everyone, and that’s okay too.
I understand that, and I actually am giving money ($25, to be exact) to a friend who wants to go on a girls’ cruise with me and someone else and asked if her gifts could be contributions towards that (seems a bit self-serving, but she asked for it, and I will oblige). But once when I asked my MIL, who is hard to shop for, for ideas, she said, “Cash.” And, I thought, “Really? Now what?” Because, honestly, I spend $25 or less on most people we give gifts to, though we occasionally give more if we find an excellent… Read more »
It is my opinion that most people give/receive gift cards in an amount that is comparable to petty cash, and as such, shouldn’t require massive consumer protections, such as billing dispute protections. These protections cost companies money to provide more resources towards customer service. I already think it is silly to pay a fee to activate a gift card, but could you imagine what it might cost the giver if these protections were mandatory for all cards? I’m all for consumers rights when it comes to things like predatory lending, misleading business practices, identity theft of major accounts, etc. For… Read more »
Just give a personal gift card “I will wash your car” (or drive it to the washing) or something – more worth than pure money-worth 😉
Gift cards are not inherently lazy or bad gifts.
My sister’s family is on a very tight budget; to her, a trip to Starbucks is an indulgence that she almost never can take. I get her Starbucks gift cards for Christmas and birthday so that she has the ability to treat herself without feeling guilty for spending money on herself. Cash wouldn’t work for this purpose because she might feel obliged to spend it on her kids, while if I gave her coffee she wouldn’t get to go to the coffee shop. A gift card is perfect in this situation.
I agree. Gift cards can be good gifts for frugal people who you want to treat themselves. If I was given cash, I’d put it in my savings account, but if I was given a gift card, I’d treat myself with it. That can be a good thing sometimes. My mum’s family live up north and we don’t get to see them very often, so they would never know what to get me for my birthday. Their only frame of reference was my cousin, but we are polar opposites. My aunt gave me a gift card to Boots one year… Read more »
I really wish it were more possible just to opt out of gift-giving with distant people. My partner’s family are lovely people but we don’t know each other very well, and after 10 years I don’t think that’s going to change – so why the (thin, since they expect to tell/be told exactly what to buy) fiction of emotional intimacy? Can’t we just do cards? Or even without emotional distance, my immediate family is geographically distant and nearly 100% without material wants – my mom is a minimalist and doesn’t want any objects, at all, end of story. My brother… Read more »
This is exactly my situation too, and my family uses the same solution.
I try to use gift cards the day after I receive them. I know I will forget and leave the balance on there. But I also make sure to read the fine print when I first get one so I will know if I need to use it right away or if I can afford to forget it for a little while.
This is funny! I just wrote a post today on how to give meaningful gift cards as presents. I love giving and receiving gift cards or gift certificates – and I think as long as you take the recipient’s interest in mind, it’s a great gift. Plus, gift cards are a godsend for procrastinators like me. I’ve purchased exactly one Christmas present so far… and it’s a gift card.
We did our wedding registry at Target a few years ago, and they pushed their gift cards really hard. When one of our guests pulled up the registry, it had their gift cards listed on every single page. We ended up getting hundreds of dollars worth of Target gift cards, and basically switched making our regular purchases from whatever other store we would have chosen to Target, even if it wasn’t always the cheapest. All in all, a real win for Target, though we might have preferred to be able to use cash to meet our own goals.
My friends recently married and all they requested from guests were Southwest gift cards. I am sure they got tons, but they fly a lot (working on degrees in different cities) so it works for them! Plus a win for the guests, because everyone was happy to contribute to the gift that will bring them together more 🙂
This season I gave gifts that keep giving — tomato planting kits or upside down planters. Sure, its kinda goofy, but the gifts are an activity for the parents and kids to do, the family gets a fresh veggie, and a few bucks are saved down the line. Total cost for each kit was about $6.
Sean @ economicallyhumble
When my parents were quite old and didn’t need anything more, we always gave them gift cards to restaurants they enjoyed. This way, we knew they were getting good meals and they didn’t have to wash or dust anything.
When my mother died and I was cleaning out her apartment, there was still some money left on some of these cards, so my brother, sister-in-law, and I dined out every night on them, which made the whole process much easier.
For the elderly, at least, this is a very good option.
I’m in the office pool for holiday gifts this year with a $10 spending limit. The person I drew is a part time employee and homeless. I’m getting her a gift card to Target because I think it will be more helpful to her than a traditional present. But maybe I’m wrong.
Grocery stores & pharmacies have GCs as well.
Homeless?! I have to be honest – if one of my coworkers was homeless I’d be suggesting we all forgo the $10 gifts we don’t even care about and buy that person a nice food basket or gift card to give them a hand up instead. Yikes!
I agree.
A co-worker is in a crisis situation, but do we know that something is not already being done for her? My guess is discretion is something that she would want and making a big work place spectacle out of it would be humiliating despite her need. Something is probably being done under the radar, at least I hope so.
For the most part, I find gift cards to be fairly useful. However, I admit I do have a stack of unused gift cards in a drawer in the kitchen. I tend to wait until the right moment or until a need arises before venturing to redeem the card. In my head, I have a list of things that we need or want, but that we’re putting off purchasing until the right time. For example, Kohl’s sends us a $10 off gift card once a month. Generally, we are not big shoppers, but our bed sheets have been dwindling as… Read more »
Maybe I’m in the minority but I would rather receive nothing than a gift card or cash. I’d be much happier with a thoughtful $5 gift than a $50 gift card, even if it is to a store that I regularly shop at. I am always willing to give suggestions if someone is having a hard time coming up with ideas but I do not want to buy my own gift. Gifts are an expression of delight for someone’s presence in your life, not a monetary exchange.
I think gift cards have its place. Gift cards to big box stores such as Target, Home Depot sounds pretty impersonal (but it depends on who you’re giving it to), but gift cards or gift certificates for manicure/pedicures, facials, restaurants, or even cafe’s seems more personal. We usually want to give something that’s practical, but giving them something they wouldn’t normally do for themselves due to budget or just plain guilt has more of a warmth to it. For me it works for people who generally don’t want or need more physical possessions. In terms of giving cash for a… Read more »
I LOVE gift cards. I will get GCs for xmas and birthday- to things like the movies, restaurants, Starbucks, the bookstore- and I’ll use them through the year. It’s great to have a movie, dinner, a latte or a book already paid for.
I love the Indian custom of giving cash for weddings, birthdays and holidays. My mom buys cash envelopes that are really fancy , puts cash in and hands it over! The giver and receiver both love it! Also, the custom in my family is to give amounts in total of 11 or 21 or 51 or 101 as that is considered lucky!
Just wrote about this issue myself, on my personal site. I admitted that I actually like getting them and even giving them to some people — while acknowledging the inherent risks.
For example, I got mugged a couple of months ago and the rogues who took my wallet got a couple of partially used gift cards along with the cash.
Still, for some people it’s a joy to receive them. My friend just gave me a $50 Barnes & Noble gift card for my birthday. Now I have to use it before the bookstore goes out of business….
I receive many holiday gifts from clients every year. I love cash but am often given gift cards. One year someone gave me a card for a store I never buy anything at and had no interest in, so when I was near the store one day I went in and saw a woman with a large basket of items she was walking up to the register with and gave it to her. She was so happy and surprised! After she thanked me she said to herself “Happy Birthday!” (I don’t think it was her birthday I think she was… Read more »
I love your solution! If people receive something they don’t like or can’t use, it’s a great idea to pay it forward.
The State of CA has great laws on gift cards. They can’t expire and you can’t have fees taken off for none use.
That said, I hate gift cards. They are thoughtless and lazy. I would rather just a very nice card and no gift than a card and gift card.
I’m one of those “I hate big box!” people so the two times I’ve given people walmart gift cards they were over the moon. My sister was so happy that I would set aside my distain and walk into a store that I HATE. She said it was one of her best gifts ever. And she loves shopping there so I was giving her an excuse to go there and pick out something for herself.
I don’t buy people gift cards. Either I think of an actual gift to buy you, or I don’t get you anything. I don’t buy gifts for very many people, though, pretty much only people who count as “immediate family” — my wife and (once she’s a little older) daughter, my parents and my brother.
I don’t *expect* gifts from anyone. If people give me gifts, great, thanks! But if you’re only giving me a gift to fulfill some social obligation, you don’t need to, I will not be offended.
I think gift cards or cash are good for older kids (tweens, teens, etc) that you are somewhat obligated to give to, yet have no idea what to get them. My niece and nephews are getting older, and this is probably the last year we are getting them actual items, especially clothes. I can’t imagine they wouldn’t want a gift card to their favorite store. That way if they go to the mall with their friends, or in my nephews’ case, the local comic book store, they can buy what they actually want. I would much rather do that than… Read more »
When I was a child, my grandparents gave each grandchild a silver dollar every year as a birthday gift and another as a Christmas gift (well, these were big Italian families — my mother is one of 7 children and my father is one of nine so there were a lot of grandchildren). I don’t know what the other grandkids did with their dollars, but I found them fascinating and most of them are still with me, now in the safety deposit box. There is a time now, as each of the nieces/nephews grows up, that it seems appropriate to… Read more »
I have 2 exceptions to your gift card rule:
1) If your airline miles are about to expire, redeem them for a gift card you or someone you know can use. I had miles about to expire 2 months ago. I “bought” 3 $100 cards for each couple whose wedding we were about to attend (good at their registry store, of course).
2) College students love gift cards to Barnes & Noble if it’s their campus bookstore. My daughter sure does. College students also appreciate Starbucks gift cards; they’ll “treat” each other using them.
I like it when my inlaws get me giftcards for Best Buy and Home Depot.
When I get extra cash, it goes in the bank account and then to pay down student loans. I do have a lot of tools and electronics that I’d love to get or upgrade, and giftcards are a good way for them to force me to do that.
I’m glad some of these commenters aren’t on my shopping list 😉 Aren’t we always saying “do what works for you”? Or in this case, what works for your recipient?
I know people who love gift cards and people who don’t. I shop accordingly. I don’t see what the big deal is.
Thank you. Though I participated in it, I think this post is a mountain out of a molehill. I think some people like to get riled up over nothing, or at least very little. 🙂
Do you.
Aw man, you just stole the punchline of our upcoming Monday post. Ah well. Great minds and all.
As a college student, I can say that grocery store gift cards go over fantastically.
I gave our only child a large Petco gift card in a birthday card..It was never delivered and stolen, it was a big pain in the ass to have it redone..I had to send a lot of information, etc. had it fax it to San Diego corporate offices, thank god the Bank we have been with almost 40years did the fax..They sent me a replacment card only took 6 weeks and used USPS to boot..chided me for not sending it by secured mail etc.When I buy my only child a gift card I make sure to enclose the receipts &… Read more »
WOW. You guys are wound REALLY tight. My entire family enjoys and appreciates gift cards. The freedom to get exactly what you want combined with the convenience far outweigh the extremely minor and rare liabilities for us in most cases. (the business going BK before you can use it, a serious risk or common occurrence? Give me a break.)
Sometimes, I’ve been able to get myself something really big by combining several small gift cards from family members at the holidays. It’s great and sure beats some crazy expensive thing I would never use but feel guilty returning.
I don’t like receiving gift cards unless they are for stores where I’d normally shop. I like cards for Barnes & Noble, Amazon, or local movie theaters. But cards in general get forgotten, and I hate it they often force you to go to stores that you’d never othewise shop at, and you usually end up spending more than the amount that’s on the card in order to use it. (actually I think that is why stores push these cards–to trick you into consuming their stuff when you otherwise wouldn’t.) I especially hate receiving gift cards for lousy malls stores… Read more »
Have a few comments about gift cards and cash. I know that as a giver it seems to be the lazy way out. I also know that as a receiver, some times it is fantastic. I was talking to by daughter about giving her a book and she said half the gift was the pleasure of going to the bookstore and getting to pick the book out herself. So although I know what book she wants, I understand how she feels.
I am no stranger to buying gift cards for people and I weigh the pros and cons of this gift choice each time… but for many it is a good option! A recent change that some gift cards offer is a “registry” which allows the user to register their card and if it is lost or stolen they are able to call in and get a new card sent to them… now that is a smart card especially if it is for a store that you know they go to all the time!
I love receiving gift cards! They never sit around. People who know me know that a giftcard to a bookstore, big box store, or restaurant will be used with a month or two. If I receive a cash gift, I feel guilty spending on myself. I am much more likely to put the money aside for a rainy day or pay down a debt. What’s not so great are VISA or AMEX gift cards, which often cost the giver an additional fee and take an extra bite out of the retailer. Some of these prepaid cards charge retailers an extra… Read more »
To keep this simple, I love receiving gift cards or vouchers. People know I’ll spend them on myself instead of saving (for a change) and with personalisation options that exist they can be very personal presents now. Also post-Christmas they can frequently be put towards something in a sale. Obviously it is helpful to receive a voucher for a store you use, e.g. an Amazon voucher I received for Christmas was spent more easily than an HMV gift card I received for my last birthday was. The danger with cash is that it can go towards other essentials. My mother-in-law… Read more »
A gift card was enclosed in an anvelope inside a birthday card. The Post Office assistant said that if a gift card is enclosed and it is lost then there is no come-back on the Post Office – solution = £5+ on special delivery. I elected for Proof of Postage and 60p first class postage. Was that the right decision?