Gift Card retail rack

The Shocking Truth About Gift Cards

What do you 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. 

Gift Card retail rack

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. 

The Facts

Not the same as cash

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.

Here’s an example: Some retailers won’t let you split purchases with Gift Cards. This means that if you have $3.52 left on your card, and the cheapest item in the store is $4, you can’t add cash to the purchase to use up the remaining balance. You’re out of luck, stuck with a useless Gift Card.

Another problem: Should that retailer 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, some get forgotten and sit around for months or years. But so what. They already got the money!

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?) 

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% never get used at all. (Here, et me do the math: .07 x $21,000,000,000 = $1,470,000,000).

Bankrate reports 47% 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. 

Are we really that stupid?

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 the 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. 

Rules, fees

Some cards have inactivity fees (now regulated by state laws, not all state laws are created equal a problem that presents itself when the Gift Card is purchased in one state but the recipient lives in another). Some retailers accept Gift Card redemptions at all locations, others at only select locations.

Bank Gift Cards (Visa, M/C, Amex) require you the buyer to pay a fee of at least $5.95 at point of purchase, which menas a $100 Visa Gift Card costs you $105.95. How nuts is that?

According to the 2009 federal Credit Card Accountability Responsibility and Disclosure Act, gift cards cannot expire for five years. However, issuers can impose inactivity fees if the card remains unused for 12 months.

Sell or exchange

If you have a Gift Card you  know you aren’t going to use, sites like Raise  and Card Cash may take it and give you cash back, credit your PayPal account, or give you an Amazon Gift Card in a percentage amount 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. 

Better idea

I can no longer resist the urge to ask: If you’re going to give Gift Cards this holiday season, why not just give the money? Your recipient can use 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 the completely out of control retail monster known as the Gift Card Retail Industry.

There, I said it and I feel so much better.





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11 replies
  1. Laura says:

    In general I agree with you about gift cards; but, yesterday I bought $100 Target gift cards for my kids for $90 and paid for them with a credit card that has 5% cash back at Target this quarter. A $100 card for $85.50 seemed like too good a deal to pass up. I know my (adult) kids always need things from Target.

  2. Sandra Catherine Wegmann says:

    As a senior on a fixed income, who loves to “do lunch” with her girlfriends, I love to get restaurant gift cards as it enables me to be able to afford to do this on a tight budget! My kids know my favorite chains and I always get a few for birthdays and Xmas.

  3. Kathy C says:

    I love the last keep in mind ideas!!! I wish I had thought of that or seen this before I bought some gift cards. You can bet I will never buy one again. 🙂 Thanks Mary. 🙂 and Happy Thanksgiving.

  4. Don says:

    I know that spending money eating out isn’t smart, but when I do it, I often pay with discounted gift cards. A lot of restaurants offer discounts on gift cards — especially during the Christmas shopping season, and I take full advantage of those sales. I’m surprised more people don’t.

  5. Karen says:

    When giving cash, I like to fold the money using origami to make the gift more fun. There are plenty of YouTube videos out there on how to do this.

  6. Deb says:

    My grandkids prefer gift cards that can be applied to their balance on apps that they use (for example, Stabucks or Amazon). Makes sense, none of the gift card gets lost because it all gets added to their available funds on their accounts.

  7. Diane says:

    I agree about the gift cards. Not everyone can get to the store to redeem the card and not everone has internet access to redeem it online.

  8. Karyn says:

    Thank you for your stellar article on gift cards. Appreciate you sharing your knowledge. I’ve been told that in the state of California when using a gift card and a certain amount is left on the card the retailer must give you the remainder in cash…..? Mary, do you know about this ?


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