Pros and Cons of Giving Gift Cards This Holiday Season

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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…

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

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 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 high yield savings accounts 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 don’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.

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, 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.

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.

Discounted Gift Card Resellers: There are several places to buy or sell gift cards. One of the first that comes to mind is eBay, but these cards don’t always come with a guarantee. I prefer to avoid any problems, so I only buy gift cards that come with a guarantee. The good news is there are quite a few sites that offer this all-important feature. Some examples include Card Cash.

You can buy and sell discounted gift cards and gift certificates to several hundred online and brick and mortar retailers from these websites. Some sites also allow you to trade gift cars with others or exchange them for rewards points or frequent flier miles to your favorite programs. And don’t forget about Amazon gift cards, which are sometimes sold at a discount from face value.

How does it work? The web companies give customers the option of selling, auctioning, or trading their unwanted gift cards. Some sites will even buy them from you, but others only act as a go-between.

Is it safe? Yes. The sites mentioned in this post all guarantee the gift card value (usually capped at a dollar limit). Always be sure to read their FAQ section and other policies.

Who benefits? Everyone. The websites make their money from transaction fees or sales if they buy and resell the cards. Customers benefit by selling or trading unwanted gift cards for something they will use, or by saving money when purchasing the gift cards at a discounted price. The stores win because people use the gift cards. One might argue that the stores would prefer people pay for the gift cards and forget about them, but studies have shown that most people who shop with gift cards end up spending more than the amount of the card.

Is it a good deal? As long as you realize there may be fees involved, yes. You can also get additional cash back on your purchase by using cash back credit cards.

  • The sites that purchase cards generally pay between 60-80% of face value. They then resell them for a profit, usually 80-90% of face value.
  • Selling and trading fees run from a flat $4 fee to a percentage based fee, depending on which site you use.
  • The sites only charge the seller and not the buyer, so it works out great if you are able to find something you need at a discounted price.

Personally, I would not buy the gift cards to re-gift them. They are pre-owned, and there is no guarantee the cards will not be scratched, folded or otherwise look used! However, if I were in the market for something in particular and I found a discounted card to a store I like, I would be willing to buy the card. Examples of some cards I would buy for personal use include restaurants, clothing stores, electronics, and home improvement. I recently saw several Home Depot gift cards for 10% off. If you are looking to do some home improvements soon, you might want to get a few of those!

The inventory always fluctuates, so check again if you don’t find what you are looking for. After major holidays should be a great time!

Watch Out for These Gift Card Scams:

For the most part, purchasing a gift card is perfectly safe for you and for the merchant. However, there are a few types of gift card frauds that can burn the average holiday shopper. Here are the most common gift card scams and frauds, and what you need to do in order to avoid them:

1. Purchasing a gift card from an online auction site can be risky. Dishonest sellers can pass off used, fraudulent, or counterfeit gift cards as the real deal. On one end are the sellers who will overstate the value of their cards—selling you a $100 Best Buy gift card for $80, only for you to find that it has less than $50 left on the card. On the other end are out-and-out scammers who will use stolen credit cards to purchase gift cards which they then sell online or for cash. Once the theft of the original credit card is reported, the gift card will be voided, leaving the buyer with a useless piece of plastic.

If you are interested in purchasing discount gift cards online, make sure you go through a reputable gift card auction site like CardCash, Gift Card Rescue, Gift Card Granny, or Cardpool. These sites allow the user to buy and sell gift cards and they offer buyer protection policies, whereas purchasing a cheap gift card from Craigslist will offer you no such policies.

2. Gift cards that come in completely sealed packages are vulnerable to thievery. Scammers can carefully open these packages and replace the unused gift card with a used, worthless one. That means that when a legitimate buyer purchases the card, the card the thief has stolen is the one that will be activated. Often, the switch won’t be discovered until the gift recipient tries to use the card.

To avoid this issue, make sure that you examine the card and your receipt to see that card number matches the activation information on your receipt. It’s also a good idea to keep your receipt, as some stores can track where the card was purchased, activated, and used.

3. You register a gift card and it doesn’t work a few days later. Some scammers will write down the card numbers of gift cards that are offered on public display racks and will call the balance inquiry number after a few days to see how much money they have “left” on their card. While they cannot use these cards in store, they can still use the unique card number for online shopping.

It’s important to note that while this particular scam has been reported by a few retail and law enforcement groups, it is not considered a serious threat. even has a page regarding this scam, which concludes that it is a possible risk, but not a huge one.

If you are concerned about this type of scam, you can make sure to ask a cashier or clerk to get you a gift card from behind the counter, rather than choosing one off the rack.

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?

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. K.C. says

    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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