Buying Gift Cards
by Robin Fiedler
Gift cards have become the most popular gift requested and gift purchased. From a $10 gift card to a $500 gift card, it can please both sides of the gift-giving ritual. The economy is still hurting, but will that slow sales of retail gift cards this year?
Deloitte's Annual Holiday Survey for 2009 indicates "Gift cards hold their first-place position for the sixth year in a row, with 64 percent of consumers planning to buy them as presents. While the number of gift cards they plan to purchase remains nearly flat (5.4 from 5.3 last year), consumers' planned spending per card is $35, which is up from $28 last year and nearly back to the pre-recession average of $36 in 2007." While Deloitte's survey shows that 64% plan to buy gift cards, in the National Retail Federation's survey, "55.2 percent of adults said they would like to receive gift cards this holiday season." Both surveys show a meeting of the minds that solves gift dilemmas.
Nevertheless, the Consumer Federation of America (CFA) found, "The most striking survey findings, however, concerned consumer misunderstanding of general purpose gift cards." For all those gift cards received, about 10% are never used. That's billions of dollars in gift card cash that consumers basically throw away, lose, or forget about.
Follow the best gift-card practices to avoid the pitfalls.
Fees - Simply put, don't purchase gift cards that charge fees. The CFA admits that the majority of the $50 billion spent on gift cards "represent purchase of store cards with no fees or expiration date. But nearly $4 billion . . . usually cost $4 to $7 to purchase and sometimes are subject to monthly fees as high as $4.95 as early as six months after purchase."
Expiration Dates - should be reasonable. The Federal Trade Commission (FTC) recommends that you "Ask about expiration dates and fees when you're buying a card." Many expire within one year; some expire within 5 years.
Store-Branded Retail Cards - "Retail gift cards may have. . . a fee for inactivity that sometimes is called a 'dormancy fee,'" according to the FTC, but the National Retail Federation (NRF) points out that "Most national retailers do not have fees or expiration dates. . ."
Bank Gift Cards/Credit Gift Cards - "carry the logo of a payment card network like VISA or MasterCard, and can be used at any location accepting cards from that network. There are more likely to be fees for activation, maintenance, or transactions on bank gift cards than on retail gift cards," according to the FTC. The NRF adds, "gift cards issued by banks, malls, and credit card companies are more likely to add expiration dates and tack on annoying activation, maintenance, inactivity and transaction fees. Some bank-issued gift cards even charge a fee for simply checking the balance." CFA reports, "Recently, American Express dropped monthly charges on all its general purpose gift cards."
Bankruptcy - Companies that file for bankruptcy usually renege on gift cards, rendering them worthless. The FTC suggests that "A competitor may also accept the card. . .[or] Even if a company currently is not redeeming gift cards, check with them periodically; they may resume doing so later."
Lost/Stolen Cards - FTC claims, "You may be out the entire amount on the card. Some issuers don't replace the cards, but others do if you pay a fee." NRF explains, "Some retailers are able to reissue a lost gift card if consumers have kept the original purchase receipt." Registering the card online allows gift card recipients "to check their balance online and receive a new card if they lose or misplace the original one."
One of the reasons for gift-card system rules, according to the NRF, is that retailers must turn unredeemed gift card revenues over to the state as "abandoned property." The plus side for the consumer: "Because retailers are not allowed to count a gift card until it is redeemed, companies will be enticing consumers to redeem their gift cards by holding special sales after Christmas and stocking shelves with new merchandise in January to give shoppers more of a selection."
CFA's "key recommendation to gift card recipients is to use all the card's value as soon as possible, within six months if possible." The weekend after Christmas, I plan on spending all my gift cards on presents for me. It's my New Year's Resolution not to throw away money.
"Buying, Giving, and Using Gift Cards: FTC Consumer Alert." Federal Trade Commission. Nov. 2008. http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt010.shtm
Gillis, Jack. "Survey Shows Consumers Misunderstand Gift Cards." Consumer Federation of America. 26 Oct. 2009. http://www.consumerfed.org/elements/www.consumerfed.org/file/gift%20card%20pr%2010-26-09.pdf
"Holiday Cheer Makes a Comeback." Deloitte. 28 Oct. 2009. http://www.deloitte.com/view/en_US/us/Industries/Retail-Consumer-Business/press-release/0fc066ff1a894210VgnVCM200000bb42f00aRCRD.htm
"Making the Most Out of Gift Cards This Holiday Season." National Retail Federation. 2009. http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=817