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.
What to Look for When Giving Gift Cards
Before making your purchase, you should realize there are pros and cons to giving gift cards: They are convenient and easier to ship than gifts, but they are also impersonal and may come with unpleasant surprises like fees, inactivity costs, and expiration dates. Here are some things to look for before buying gift cards:
Look out for fees! Read the fine print before purchasing gift cards because some of them come with an automatic monthly or annual fee. Some cards may not begin charging fees until a certain amount of time has passed. The fee and time limits vary, but it’s not unusual to hear about a 2% monthly fee, or a flat rate fee of several dollars per month. These fees are more common with third party gift cards and are less common with gift cards for a specific store.
Avoid gift cards with expiration dates! Again, read the fine print before purchasing gift cards and be sure to look for expiration dates. Many store gift cards don’t have expiration dates, nor do other cards like those from American Express.
Where can the card be used? Many gift cards can only be used at certain stores, while other gift cards can be used anywhere. You should also check whether or not store gift cards can be used online as well as in the store because some store cards can only be used in stores. I ran into this problem before and had to wait almost a year before I could use the card because the item I wanted to purchase was only available online. It was frustrating!
Advantages of Giving Gift Cards
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 CardCash.com 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
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.
What to do with Unwanted Gift Cards
Send them to me. Just kidding! There is a huge secondary market for gift cards and you can buy, sell, and trade gift cards at a discount. You may take a small hit on the face value of the card, but at least you won’t have to worry about not being able to use it. You can read more about buying and selling gift cards.
Which Gift Cards Are the Best to Purchase or Give as Gifts?
You want to make sure you get the most out of your gift cards, so the most important thing you want to consider is whether or not the recipient will use the gift card. If you are confident they will use it, then shop for a gift card to their favorite local or online store. Just be sure they will have access to use it. Some of the most popular gift cards include Amazon.com, The iTunes Store, The Apple Store, and Best Buy. You can also go with a non-store branded gift card, such as one that bears the MasterCard, Visa, or American Express logo. These cards can be used at virtually any location that accepts these credit card brands.
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?