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. 

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. 

• MORE: Best Way to Sell Gift Cards for Cash

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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