Pros and Cons of Giving Gift Cards This Holiday Season

by Ryan Guina

One of the most popular gifts around the holidays is gift cards. There are a lot of reasons people give gift cards – convenience, not knowing what to buy someone, and saving money are a few examples. I know I have resorted to giving gift cards at the last moment. But even though gift cards are convenient, they aren’t always the best gifts. And this year with many stores closing down, some of them may be worthless.

Advantages of giving gift cards

Giving Gift Cards

Should you give gift cards as gifts?

Convenience. Gift cards are great for people who are difficult to shop for or who have specific needs. College students are another group of people that gift cards are good for because they often have limited storage space for bulky items. Gift cards allow them to choose how they spend their money.

Low shipping costs. Shipping is expensive, especially for large items! On the other hand, shipping a gift card costs the price of a first class stamp, or even less because some gift cards can be sent electronically.

Save money. You can save money on gift cards if you know where to buy them. Some gift card retailers offer 5-10% discounts on certain stores. I recommend going simple with an Amazon gift card or shopping at online vendors who guarantee the value of the gift cards, including and GiftCardRescue. These sites often have deals on a wide range of discounted gift cards. You can save more money by using cash back credit cards.

Avoid giving unwanted gifts. Let’s face it, some people are notoriously difficult to shop for, and some people just don’t put a lot of thought into gift giving. Gift cards let the person receiving the gift choose what to buy.

Why you shouldn’t give gift cards for Christmas

Gift cards are impersonal. You don’t need to put a lot of thought into a gift card; just swipe your credit card and it’s done.

Interest free loan to the company. When you buy a gift card, the company takes your money right away and you don’t get any value in return – just the promise of future value. The company can then use your money for business activities while you hold an IOU. Your money is better off earning interest in a high yield savings account instead of being tied up in an IOU.

Not guaranteed. Gift cards are considered an unsecured loan to the company, so if the company files bankruptcy, gift card holders are low on the list to get paid (meaning repayment may never happen). Likewise, if you lose most gift cards, you are also out the money.

You may spend more money. Even though you can save money on gift cards, you could end up spending more money buying gift cards than you would if you bought a gift. Why? Because you won’t be able to take advantage of sales. Giving a gift card for less than $20 may be considered a waste of time (or even cheap), but giving an inexpensive gift shows thought, and quite honestly, most people won’t know how much you spent on an item.

Fees. Some gift cards charge upfront costs or ongoing maintenance fees if the card is not used within a certain time frame.

Expiration dates. Some gift cards are good forever, and others expire within a certain time frame (generally 12 months). Always read the fine print before buying gift cards.

Verdict: Are Gift Cards a good Christmas gift?

Gift cards definitely have their place. I buy discounted gift cards for myself to stores where I shop regularly (for example, Home Depot and Best Buy). But I try not to give gift cards as gifts unless they are requested because I prefer to put some thought and creativity into the gifts I give. If you decide to give gifts cards this Christmas or at any other time of year, be sure to read the fine print to avoid any possible fees.

What are your thoughts about giving gift cards?

Published or updated May 16, 2013.
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{ 1 comment… read it below or add one }

1 K.C.

Good article on pros and cons of gift cards.

I send gift cards to my grandchildren who live out of town because I have no idea what they need/want/already have. If I have to ask them what they want, I might as well let them just buy it with the gift card. We used to spend a lot of money shipping gifts to the grandchildren. Now we include what we would have spent on shipping as part of the gift card. They can actually buy something better with the additional money.

I like the idea of buying gift cards at a discount for yourself. Neat way to save on regular spending. Thanks for the tip.


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