The pros and cons of gift cards
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.
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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.
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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).
Blogger 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.