What to give for Christmas when you don’t have time to shop, don’t want to put much thought into it and just need to check someone off your list? A gift card, of course.
At this point, I will resist the urge to list all the reasons that gift cards are not really gifts, why they are so problematic for both the giver and the recipient, or ask if you’re going to give money, why not just give the money?
The truth is, consumers racked up more than $162 billion in gift card sales in 2022. I can’t stop the insanity, but I can shed a little light on how these things work and how to avoid the pitfalls.
Understand that no gift card is the same as cash. It’s not. It’s the same as store credit. That’s what you are giving as a gift. The store gets to write the rules for how it will handle your recipient and its store credit. And should that store fall into financial trouble, that gift card will become instantly worthless even if it has no expiration date. Did I mention that a gift card is not the same as cash?
Retailers are crazy about them. There’s a reason that retailers are so in love with gift cards: They get the money up front. And they know that lots of gift cards get lost, and some get forgotten and sit around for months or years. Americans have a collective $21 billion in unspent gift cards floating around out there. The average household sits on $300 in unused gift cards. Do you even know where yours are?
Unused gift cards represent free money for stores. Consumer Reports has estimated that a quarter of all gift cards go unredeemed for a year after purchase, and about 7 percent never get used at all. Bankrate reports 47 percent of U.S. adults have at least one unused gift card. It all adds up to an estimated $8 billion windfall annually for the retail industry.
Get smart. Buyers of gift cards and recipients should know that not all gift cards are created equal. Like to shop both at the store and online? Not all gift cards allow customers to buy and redeem gift cards in the store and online.
Some retailers charge the buyer of a gift card a shipping fee to send a gift card to a recipient.
Many gift cards come with ridiculous restrictions should you need to make a return or exchange—like you must have the used gift card in your hand for the store to credit back any refund. Oh, you threw it away because it was empty? Too bad, sucker.
Some cards have inactivity fees (now regulated by state laws and, again, not all state laws are created equal). Some retailers accept gift card redemptions at all locations, others at only select locations. Expiration dates are less of a problem these days. Few major retailers have them anymore.
Sell or exchange. If you have a gift card you just know you aren’t going to use, sites like Raise, Gift Card Granny and Card Cash may take it and give you cash back, credit your PayPal account or give you an Amazon gift card a percentage of the original gift card’s value. Yes, you'll be “losing” money by selling it at a discount, but if you weren’t going to use that gift card anyway (or you were going to use it on something you didn’t really want), it’s probably still a better deal.
Get a discount. You can buy gift cards on Raise from about 5 percent to 35 percent, depending on the store. Not bad if you compare that to leaving your card lying in a drawer someplace for your heirs to discover someday.
I can no longer resist the urge to ask: If you’re going to give money this holiday season, why not just give the money? Your recipient will get every single penny of that $20 bill to spend wherever he or she desires. Chances of that money getting lost or forgotten are slim-to-none, and you won’t be feeding that completely out of control retail monster known as the Gift Card Retail Industry.
There, I said it, and I feel so much better.
