The pros and cons of gift cards

photo illustration for gift card article

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.

Related >> Discounted Gift Cards: The New Coupon

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.

Related >> Picking the right high-yield savings

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

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.

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FinanceAndFat
FinanceAndFat

I don’t like the idea of tying up money with a certain gift card and a certain company, but for some reason gift cards seem to be more acceptable as a gift than cash. How did that happen?

Personally, I’d rather receive cash, but my family and friends at least know me well enough to give me a gift card for a store I go to regularly. That way I can use it quickly and it’s a nice little bonus.

Dustin Coates
Dustin Coates

Another problem with gift cards (and a reason I’m sure that retailers love them): what about that last $4.32 or whatever you have on the gift card after buying what you want? Not using it would be like throwing away money, but you’re never going to use up a gift card exactly, so you’ll end up spending more money.

Peachy
Peachy

I hate shopping, so I hate when someone gives me a gift card because I have to leave my house and deal with other people (ha ha). I have never received cash as a gift for Christmas. If someone is willing to get me a gift, they should know what I like. Most gift cards are wasted on me and I hate giving them. I would prefer someone regift something that I gave them, than buy junk that they don’t need because I forced them to go to a store and use a gift card. I have had many gift… Read more »

whitney
whitney

Oh, I don’t know. Real gifts are the best, but if it’s between cash and a gift card, I’ll take a gift card any day. If you give me cash, I’ll feel obligated to spend it on bills or something practical; gift cards are more fun and thus more of a gift. Call me irresponsible. =)

Anna
Anna

I decided that I wasn’t going to be giving gift cards this year, so I told people on my list that they either had to give me some clues as to an actual item or I would be giving straight cash. I wonder if I’m more comfortable with this because I’m Chinese and used to getting cash for holidays like Chinese New Year…

Juffy
Juffy

Give me cash. Gift cards only limit my options. I can’t believe how stupid those things are. It really blows my mind that people buy those things. You have to be completely brainwashed by Christmas! Ugh.

Dave
Dave

I buy a lot of clothes from Land’s End myself, J.D., as their styles are classic and built to last. $20.00 is nothing for a polo shirt that will last 7 years and certainly not go out of style. And yes, they’re great for catalog shopping and online shopping, but don’t forget that Sears bought Land’s End several years ago. That’s why Sears always has a Land’s End section in their stores. And what’s really great is ANYTHING you order from Land’s End that doesn’t work out can be returned right away to Sears. If you like Land’s End, you’d… Read more »

Melissa A.
Melissa A.

I like giving gift cards, and I like receiving them. If I was given money in a card, I probably would use it for something boring. I need some new clothes, so if I get a gift card for my favourite store, I know I will spend that on clothes instead of say, groceries, or a cab ride (which I often need during the holidays if I’m travelling by bus).

I’ve never had any problems with the cards, and make sure to give them knowing they can be used.

Megan
Megan

I think at least part of the mega-corporation’s infatuation with gift cards is due to the decreased number of possible returns of unwanted gifts after the holidays. Although I’m sure they are also a cash cow for the reasons listed above, the corporations are not completely out to get us all with gift card sales.

Stacy
Stacy

One of the best uses for a gift card is as a thank you/recognition gift. Especially for teachers, bus drivers, and other people who touch your lives but aren’t close friends or family. I know several teachers who prefer gift cards to another coffee mug or pen set. What about those hard to shop for people? A gift card to their favorite restaurant is a great solution. While I wouldn’t use a gift card for a close friend or family member, sometimes you want to give a gift to someone you aren’t as close to. With so many people wanting… Read more »

Kacie
Kacie

Gift cards are nice in some circumstances. For our wedding, we received a ton of Target gift cards. We were registered at Target, and I guess people figured we could use the cards to get things leftover on our registry.

We did. An added bonus, we got our new things after we moved to our new city–so we didn’t have to move the items.

For things like birthdays or Christmas, it’s nice getting gift cards to a store or restaurant that we’ll actually go to.

jtimberman
jtimberman

Some people are more offended by a gift of money than a gift card. I find that strange. I’d rather get the money.

James Crocker
James Crocker

Well, I don’t mind when I receive gift cards. For me personally, they are a pain to use. I have a money clip, so I don’t carry arround excess giftcards, therefore I never remember to use them. (I normally forget about them after a month). I end up giving them to my wife who IS able to use them and/or remember she has them. But GIVING gift cards, ugh what a pain. Just this weekend we had a christmas party with family, my wife and i decided to get a giftcard for our teenage niece. Being a smarty-pants, I decided… Read more »

greg
greg

I just wanted to let you know that you can frequently get 90-105% of the cash value of a gift card on ebay. For example, and here.

From what I’ve read, disabled people use these to shop online at their various websites.

Money Blue Book
Money Blue Book

Too bad there is such a stigma with giving gift cards and cash. They’re really the best gifts usually because the recipient gets to choose what he or she truly wants.

RIP CompUSA
-Raymond

Anne
Anne

I generally dislike gift cards as well, but think they can be a good gift in limited circumstances. Your example of giving a gift card to your father instead of a tie is a good example. My father hates to shop, so a gift card would be like a burden. But for a teenager who loves to shop and doesn’t have much spending money, a gift card is a great gift–you’re giving not just the items the teenager purchases, but the shopping experience itself. Similarly, if you know someone who loves to hang out at a coffeeshop, a gift card… Read more »

Plan Your Escape
Plan Your Escape

I think a nice, heart felt, hand written note and some cash beats a gift card hands down, no questions asked, any day. It’s easier to use, it provides flexibility and it never expires. As long as you take the time you write a nice note to accompany it, I don’t think cash is too “cold” at all.

Alexandra
Alexandra

Just wanted to note about the cards that are charging fees and/or have expiration dates – you should check to see if this is illegal in your state. In Maryland, card issuers are not allowed to charge inactive/late fees, and gift cards or certificates are never allowed to expire. Granted, this only works if the card was *purchased* in the state making those things illegal. I also learned that it is better to buy a card directly from the issuer vice at the grocery store, because the issuer will have greater control over adding refunds directly to the card (if… Read more »

Matthew
Matthew

This might undermine the giving spirit a bit, but if you get a gift card you just don’t think you’ll use and you don’t want to re-gift it, there are places where you can buy, sell, and trade gift cards online. I’ve never used any of them, but here’s some links I found:

http://www.giftcardbuyback.com/
http://www.cardavenue.com/

Jason
Jason

I think I’m going to start asking for straight cash. I know that some people don’t think that’s a good gift, but it really is for me. Most of the things I really want are pretty expensive, and I have *zero* qualms about keeping that money set aside for fun stuff as opposed to paying bills, etc., but really, if I really needed some money to pay bills with, then I’d rather have that money available for that than be stuck with a bill I can’t pay and a gift card to some store. For this Christmas (since we’re so… Read more »

Broke Grad Student
Broke Grad Student

Like a lot of others, I’d prefer cash to a gift card. In my opinion, it’s more personal because you’re saying that you trust the person enough to spend the money on something useful. I recently compiled a list of 9 great gift ideas for broke college students. The list may surprise you.

Tara
Tara

Although there are still loopholes (such as gift cards sold by shopping centres) the government of Ontario recently banned expiry dates on gift cards. It’s a start!

Lazy Man
Lazy Man

Thanks for mentioning the savings that I make. I really think this is one of the overlooked ways to get a discount on things that are normally not discounted. I’m not a member of Netflix, but I bought a gift card for my mother at a drug store and saved 5% with a cash back credit card (that I pay off each month). Some people spend a couple of hundred dollars a year on Netflix, and this is a good way to pocket $10-15 for yourself if you were going to buy it anyway.

Chibioki
Chibioki

When buying gift cards people should also remember that there is a big difference between a gift card and a gift certificate. Some places require that the gift certificate be spent all at once. One of the most insulting things I saw in retail was when i guy walked into my store asked what the cheapest thing in the store was and then tried to buy a $2 salt shaker with a $100 gift certificate so he could pocket the difference. I tried to tell him he needed to spend more but he said ‘Well i need the money for… Read more »

Poundwise
Poundwise

I prefer buying gifts most of the time, however, there are times when a gift card is clearly a better option. When that occurs, I buy VISA gift cards. The ones I purchase do have an expiration (12 months from date of activation) but do not have any fees or other odd terms for the recipient to worry about. (Google: IDT Gift2Go) Since it is a VISA gift card, they can buy anything they want, practically anywhere they want. If the card had some odd amount left over after purchase, like $1.12 or something, they can always use it the… Read more »

Jeffeb3
Jeffeb3

Gift cards are a hot subject in my family. The biggest complaint is that they are impersonal. They are just easy to get someone a BB gift cert. instead of figuring out what kind of music they like and buying them a CD or something. So, I’d add one con to your list. They are impersonal. On the other hand, I am now at the maturity now to have reduced desire for stuff. So gift cards are good because I don’t get stuff that I wouldn’t buy for myself. A great reason to give gift cards is that if I… Read more »

J.D.
J.D.

In my original draft of this article, I mentioned that although I don’t mind receiving gift cards, I don’t like to give them. Something about them strikes me as tacky. As others have mentioned, they seem to imply a lack of thought on the part of the giver. On the other hand, I don’t mind receiving cash. Nor do I mind receiving the cards. I just don’t like to give them.

Sharon
Sharon

I think gift cards can be great given the situation. We live cross country from family and gift cards are one way to save on shipping. We’ve at different times made gifts and had to pay more for the shipping, an outrageous amount more like when we made birdhouses (okay,l could have planned that better and I don’t give gift cards all the time). Also, I have an elderly aunt who would hate to get cash because she’s so afraid of someone stealing it, but a gift card to a grocery store she really appreciates. My husband’s company for holidays… Read more »

Keith W. Twombley
Keith W. Twombley

I spent some time working at Best Buy. During the holidays (well, and any time, really) they really harped on selling gift cards. Best Buy tracks a lot of statistics about transactions. I can’t remember the exact number, but customers who used a gift card in their transaction end up spending more (even after you take the gift card out of the equation) than customers who don’t use a gift card. So for example you might go to best buy to buy a DVD, so you spend $20. Or, if you have a $50 gift card, you might go in… Read more »

AHT
AHT

Gift cards are a mixed blessing. I’ve gotten cards from places like Best Buy and Macy’s for the holidays before, and they always feel like a cop-out gift. But I’ve also gotten gift cards/certificates from yarn stores, and that means a lot to me. Knitting is my main leisure activity, and I spent a lot of time and money on my hobby. Someone who isn’t a knitter will have a hard time figuring out what to get, and I understand that — unless you’re a knitter yourself, there’s just no way a lot of the things I have lying around… Read more »

Jordan
Jordan

don’t forget the possibility of the store going out of business. With CompUSA Closing right now, I get lots of calls with people who have gift cards ranging from 20 dollars they received as gifts to 2000 dollars from when they returned a product for store credit. The stores will all be closed down by February. Luckily, compusa is offering refunds on cards, but its going to be a pain for those who aren’t near a store anymore.

merd
merd

i work for a company that designs gift cards. i have been here for four years. our program charges no fees, has no expiration, and only requires that whatever merchant you have purchased the card from will be the only place (or network of locations if the merchant has chosen to set up accordingly) that the person you give the card to can spend it at. my only advice is that if you have a buck fifty left on the card, use it… else it is called “breakage” meaning it is money in limbo that cannot be claimed by the… Read more »

merd
merd

one last thing… other bank affiliates and Gift Cards like AmEx, STAR and Visa branded gift cards have FEES on them. fees to buy them. fees if you dont use them quickly and basically, even though you can use them universally, they degrade in value from the moment you purchase them AND they must be purchased with cash. you cannot buy them with credit. so… a $100 card actually costs you something like $106. (losing six bucks there) and if a person does not use it for two months… there are inactivity fees of probably around two dollars a month.… Read more »

Mister E
Mister E

I personally hate gift cards but to me cash is just an unacceptible alternative. To give cash is just the most impersonal thing you can possibly do. As for receiving it, like some others on the board I have a hard time putting cash towards anything non-essential when there are bills to pay and savings accounts to top up. I give Christmas gifts to as few people as possible though, I don’t like to give gifts to casual acquaintences nor do I like to receive them. A phone call or note just to say Merry Christmas is plenty for me… Read more »

Roger
Roger

Cash is pretty tacky to ask for, I think, though it’s nice to receive…but I don’t really want $20 from a friend, I’d rather have a gift or a phone call, or nothing at all.

I’m a little surprised any retailer would require that a gift card be spent on merchandise. I think the last card I got, ten years ago for Home Despot, was spent and they gave me the under $5 balance in cash as change. Maybe that was in the days before “swipeable” cards.

Julie
Julie

I am, in general,not a huge fan of gift cards, unless they are given with a specific purchase in mind. For example, last year a family member had been mentioning that they wanted to purchase a flat screen HD TV but weren’t entirely sure they could swing the whole cost. Everyone in my family purchased gift cards to his favorite electronics store, in the amount they wanted to spend, with a note attached that it was to go towards his TV. We thought about pooling together and buying the TV, but we were about $400 short. Instead, we did the… Read more »

Lindsey @ ETJ
Lindsey @ ETJ

I enjoy giving and getting gift cards to places like restaurants, museums, movies, etc. Those type of “experiences” don’t fit well into our regular month-to-month budget. So when someone gives us a gift card to a restaurant or the movies, they’re giving us the gift of that experience. I’m not a real big fan of gift cards either. However, in our family we have some picky teenagers who ask for gc’s to places like Target, Starbucks, Hollister, etc. I’d rather give them a small gc to a store they asked for than waste my hard earned money on something they’ll… Read more »

SJ
SJ

Some of our favorite gift cards have been for restaurants – one of the best wedding presents we had and also some favorite holiday presents – introducing us to new restaurants or helping us go somewhere usually above our budget, but again, it helps to have come from a friend who knows us well enough to pick restaurants we would enjoy. Another good one I haven’t seen mentioned is movie gift passes – they usually have a fairly long expiration date, and it’s a lot of fun to go to a movie for free. One nice gift for new parents… Read more »

plonkee
plonkee

To me, it’s the thought that counts. Which means that if you know someone would really love to shop a particular shop, but you don’t know exactly what they want, then a gift card is a great gift. Otherwise, not so much.

Steven Fisher
Steven Fisher

Generally I hate giving gift cards. I was quite happy we were given some at a baby shower for our first, since it allowed us to fill in the gaps of what we were missing. I’d never given one, until last year. Last year, we gave my parents a gift plus a gift card for a nice restaurant. They saved it all year and used it on their anniversary. This year, we’re giving my dad a couple small gifts plus a gift card for his favourite coffee place. Generally I think Liz Pulliam Weston is closest, but I do think… Read more »

Josh
Josh

I think the main problem with giving cash is that you want the person to use the money to buy something for themselves. If you just give cash, it’ll probably go in their wallet and end up as gas or food, instead of the intended shirt, cd or other more “fun” gift. Gift cards force them to buy something like this for themselves. I think the better alternative is for the AMEX or VISA gift card, though as others have said there are sometimes fees attached.

Elle Rayne
Elle Rayne

As others have said, Visa gift cards are a good deal. They have no fees, and in my experience the card balance gets automatically printed on your receipt. Handy!

Red Zinnia
Red Zinnia

I love getting gift cards! And I’m a big fan of the Visa gift cards for my oldest three kids (ages 18 to 22). They love music, games, clothes etc, but don’t really want their fogey mom picking their stuff out for them (and come on, you have to admit you probably feel the same!). Visa cards have been a huge hit at my house, and they take all the stress out of holiday shopping for me. I get a card for each kid, plus a few modest gifts each so they have things to unwrap (usually clearance items). I… Read more »

BillyOceansEleven
BillyOceansEleven

In some instances, I like giving gift cards. For instance, my admin assistant loves Starbucks, so I will give her Starbucks gift cards for Christmas and such since I know it is something she likes. However, for someone who is family or you are extremely close with, giving someone a gift card just sends the message you were too lazy to think of a real gift that they would like. I don’t mind getting gift cards, however I get annoyed when someone gives us a card to a place we never shop. For instance, I somehow end up getting at… Read more »

Siena
Siena

I love getting gift cards. I sometimes get them to places I don’t normally shop (Cost Plus for example) but I like shopping and having a budget amount makes it kind of an adventure. I have gotten gift cards from the usual sources, Target, Starbucks, Barnes and Noble–and the not so unusual, a grocery store, a local restaurant, home depot, trader joe’s, jamba juice etc . . .–but I always use them. In California, gift cards never expire. Also for 2008, a bill was signed (in California only again) that if you have a gift card with under $10 on… Read more »

Fecundity
Fecundity

I love getting gift cards to stores or restaurants that I frequent (or wish I could frequent) regularly. If you give me $100 in a cheque, I’ll stick it in my savings account or send it towards a bill. Practical, but not fun. If you give me a $100 Chapters (bookstore) card, I’m going to enjoy some new books. Just remember to think about the type of card you’re sending to your recipient. It needs to be appropriate. I don’t drink coffee, so I don’t think much of any Starbucks card given to me, whereas Hubby the caffeine addict would… Read more »

Sarah
Sarah

My family and friends exchange wish lists every year. This year, one of the things I asked for was herbs and spices for my kitchen. I would much rather open a package on Christmas morning and find a $2 container of cinnamon than open an envelope and find a $20 Amazon.com gift card. The gift-card (and money-gift) mentality makes holiday gift-giving into a sanitized version of financial assistance. The point of gift-giving is not to get me stuff. That’s what work and savings and budgeting is for. Gift-giving is about strengthening social ties and expressing care for the other person.… Read more »

E.C.
E.C.

I’m not a huge fan of gift cards, but under the right circumstances, they can be a good gift. A couple of years ago, my brother knew that I’d really like to have a movie that came out on DVD the week after Christmas so he got me a gift card and a note explaining what he had wanted to do. It was sweet and thoughtful. Like many of the other posters, if I get cash, I feel compelled to save it, whereas a gift card encourages a little frivolity. This year, I’m considering getting him a generous gift certificate… Read more »

Max
Max

I like gift cards to restaurants and services… places where you can’t buy something physical and put it in the box. If someone gets me a gift card/cert to my favourite restaurant, that’d make me pretty happy. A gift card to Zellers/Wal-Mart? Not so much.

metroknow
metroknow

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… Read more »

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