A fast and simple gift option this time of year is the gift card. I have received gift cards as Christmas gifts, and I have also given cards as gifts. It seems like a great way of giving somebody a gift while at the same time letting them buy something that they will really use and enjoy. After all, it's better than giving a fruit cake or a tie, isn't it?

The answer is: it depends.

While gift cards do carry value to the person who receives them, there are some drawbacks to using them; drawback that you may not even be aware of.

Americans spend about $50 billion on gift cards each year. This is not only a gift to the recipients, but a huge gift to retailers as well. They are guaranteed sales, whether the cards are redeemed or not. Amazingly, many gift cards are not redeemed, or they are not redeemed for their full value. If the cards are not used before they expire, the recipient loses the rest of the value of the card. In other words, that's free money for the retailer. As much as 20 percent of the value of all gift cards sold is never used.

It also pays to read the fine print of the terms of the gift card. Some cards will charge fees if they aren't used within a specified time, and some will charge a fee against the card if the consumer has the store check the remaining value of the card. If the store where the card is purchased closes for some reason, the value of the card is lost. If the card is purchased from a store chain and that chain files for bankruptcy protection, the bankruptcy judge determines if the store must honor the value of the gift card.

Another drawback to the card is that it may not cover the entire cost of most of the merchandise available at the retailer. It is estimated that recipients of gift cards tend to spend 20 percent more than the value of the card when they redeem the card at the store (if the card is redeemed at all).

Gift cards can seem like convenient, thoughtful gifts, but be aware of the potential drawbacks. If you really want to give a "spendable" gift this Christmas, consider putting cash or a check in a nice Christmas card. While cash might seem like an impersonal gift, it certainly carries less baggage than store plastic, and it can be spent anywhere.

2 comments

  1. BillyOceansEleven // December 20, 2008 at 8:42 PM  

    I agree in this environment that gift cards are plain silly. As our economy goes into a tailspin, more retailers will file for bankruptcy and more consumers will be left with gift cards that are worthless, or at minimum will be in a situation where they have to spend the cards on whatever to avoid losing the value. I had a couple of Linens N Things cards I had to just spend on whatever, which in a going out of business sale is pretty challenging.

    Just give cash, or put some thought into a real gift.

  2. iowafarmwife // December 21, 2008 at 9:31 PM  

    I agree, I'll take cash any day of the week!

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