Gift Cards: The Good, The Bad, The Ugly and What You Need To Know
George Boelcke CCP
November 21, 2007
Would you pay admission to get in the mall or let your company claim back some of your pay because you hadn’t spent it yet? Well, that’s what lots of gift card issuers are asking you to do. But first, let’s go back to the beginning.
It wasn’t that many years ago when there were little slips of paper called gift certificates. However, in the last few years, retailers have worked hard to market gift cards and they’ve been wildly successful. According to the National Retail Federation, we’ll spend more than $26 billion cash on gift cards this holiday season, up about 10 percent from last year. The averages are also on the rise to more than $156 this year and $40 higher than just two years ago.
Are they the perfect gift or a present of last resort? That’s in the eyes of the beholder. A research study by CardTrak reports that 57% of us plan to buy at least one gift card. Of those, 88% will buy two or more and almost a fifth will buy six or more.
From a budgeting perspective, they can help, since they’re for a specific dollar amount which makes it easier to budget for anyone who can’t trust themselves to make the hard choice of limiting the cost of gifts. Gift cards can also give the other person a lot of flexibility of finding that “perfect” present for themselves. But a $20 or $50 bill does the same thing without taking the chance they’ll lose it, have it expire or restrict them to a certain store or chain.
Retailers have a love-hate relationship with gift cards. They love the volume and the fact that they’ve got you locked in to buying from them with no chance of a refund. But they hate the fact that they can’t make you spend it right now. Until you do, retailers can’t count all that money as income. It’s an accounting thing, but to them, it’s like you getting all of next years’ pay checks but you can’t cash them, and don’t even know when you’ll ever be able to.
When the gift cards expire, as the majority did, just a few years ago, it’s pure profit for the store and you’re out all of that money. In fact, according to Consumer Report, about $8 billion in gift cards went unclaimed in 2006. That’s around 25 percent of all gift card values! USA Today reported that Home Depot took $43 million of gift cards as income in June of 2006. But they’re not alone. There’s a huge list of retailers who have been able to take a ton of gift card sales directly into income, since it’s only been in the last two years that legislation or consumer pressure has taken away their restrictive expiry dates.
Like everything else, it’s buyer beware:
Ask some questions, and the first one is to make sure the card you’re buying does not have a fee or an expiry date. That’s the case with 92% of retail cards.
Careful with credit card issuers. Many American Express, Visa and MasterCard ones come with an expiry date AND charge a purchase fee.
Avoid buying gift cards through auction sites as a huge percentage of them are fraudulent.
Keep original receipt in case there’s a problem with the redemption down the road. It might be a technical thing of not activating it properly, the code wasn’t entered or entered incorrectly, or the clerk pocketed the money and all you bought is a little piece of plastic with no value!
Don’t buy the gift card on top of the pile right at the counter. Fraudsters will take down these numbers and replicate a phony gift card. Grab one from the middle of the stack that hasn’t had the code number exposed to the last dozen customers at the cash register.
Who cares if it’s re-loadable when you’re giving it as a gift – that’s just marketing. But you do need to know if they can be used over their limit. After all, a $50 gift card doesn’t help if you can’t get the purchase to be that exact amount.
Make sure the gift card is from a well-established company that will still be in business when the recipient wants to use it. Your risk is often in direct proportion to the size of the store or chain.
If you’re re-gifting one of your cards, make sure the card hasn’t expired and confirm the value.
And last, but most important: If you’ve received some gift cards, or have some of them still hanging around – somewhere in the house: Out of sight is out of mind. Don’t put your gift cards in a drawer - tape them to the fridge! When they’re in your face, you’ll remember to use them. And if you’re only using part of the card, get the cashier to lend you a felt pen and write the balance you’ve got left right on the back of the card!
If it’s down to just a few bucks, you’ve got three choices:
Buy something else right then and there to use up the card.
Take it home and take the chance that you’ll find it again and bring it next time. That’s when you’ll be making a long trip to a specific store to buy something for $40 bucks to be able to use your $3 gift card balance…maybe…if you find it…
Or better yet: Pay it forward and give the few bucks left on the gift card to someone else in the lineup behind you. It’ll make their day, cost next to nothing, and will make you feel great. Kind of like the real spirit of Christmas all over again, later on in the year, just by doing something nice for someone you’ve never met and won’t ever see again.
It wasn’t that many years ago when there were little slips of paper called gift certificates. However, in the last few years, retailers have worked hard to market gift cards and they’ve been wildly successful. According to the National Retail Federation, we’ll spend more than $26 billion cash on gift cards this holiday season, up about 10 percent from last year. The averages are also on the rise to more than $156 this year and $40 higher than just two years ago.
Are they the perfect gift or a present of last resort? That’s in the eyes of the beholder. A research study by CardTrak reports that 57% of us plan to buy at least one gift card. Of those, 88% will buy two or more and almost a fifth will buy six or more.
From a budgeting perspective, they can help, since they’re for a specific dollar amount which makes it easier to budget for anyone who can’t trust themselves to make the hard choice of limiting the cost of gifts. Gift cards can also give the other person a lot of flexibility of finding that “perfect” present for themselves. But a $20 or $50 bill does the same thing without taking the chance they’ll lose it, have it expire or restrict them to a certain store or chain.
Retailers have a love-hate relationship with gift cards. They love the volume and the fact that they’ve got you locked in to buying from them with no chance of a refund. But they hate the fact that they can’t make you spend it right now. Until you do, retailers can’t count all that money as income. It’s an accounting thing, but to them, it’s like you getting all of next years’ pay checks but you can’t cash them, and don’t even know when you’ll ever be able to.
When the gift cards expire, as the majority did, just a few years ago, it’s pure profit for the store and you’re out all of that money. In fact, according to Consumer Report, about $8 billion in gift cards went unclaimed in 2006. That’s around 25 percent of all gift card values! USA Today reported that Home Depot took $43 million of gift cards as income in June of 2006. But they’re not alone. There’s a huge list of retailers who have been able to take a ton of gift card sales directly into income, since it’s only been in the last two years that legislation or consumer pressure has taken away their restrictive expiry dates.
Like everything else, it’s buyer beware:
Ask some questions, and the first one is to make sure the card you’re buying does not have a fee or an expiry date. That’s the case with 92% of retail cards.
Careful with credit card issuers. Many American Express, Visa and MasterCard ones come with an expiry date AND charge a purchase fee.
Avoid buying gift cards through auction sites as a huge percentage of them are fraudulent.
Keep original receipt in case there’s a problem with the redemption down the road. It might be a technical thing of not activating it properly, the code wasn’t entered or entered incorrectly, or the clerk pocketed the money and all you bought is a little piece of plastic with no value!
Don’t buy the gift card on top of the pile right at the counter. Fraudsters will take down these numbers and replicate a phony gift card. Grab one from the middle of the stack that hasn’t had the code number exposed to the last dozen customers at the cash register.
Who cares if it’s re-loadable when you’re giving it as a gift – that’s just marketing. But you do need to know if they can be used over their limit. After all, a $50 gift card doesn’t help if you can’t get the purchase to be that exact amount.
Make sure the gift card is from a well-established company that will still be in business when the recipient wants to use it. Your risk is often in direct proportion to the size of the store or chain.
If you’re re-gifting one of your cards, make sure the card hasn’t expired and confirm the value.
And last, but most important: If you’ve received some gift cards, or have some of them still hanging around – somewhere in the house: Out of sight is out of mind. Don’t put your gift cards in a drawer - tape them to the fridge! When they’re in your face, you’ll remember to use them. And if you’re only using part of the card, get the cashier to lend you a felt pen and write the balance you’ve got left right on the back of the card!
If it’s down to just a few bucks, you’ve got three choices:
Buy something else right then and there to use up the card.
Take it home and take the chance that you’ll find it again and bring it next time. That’s when you’ll be making a long trip to a specific store to buy something for $40 bucks to be able to use your $3 gift card balance…maybe…if you find it…
Or better yet: Pay it forward and give the few bucks left on the gift card to someone else in the lineup behind you. It’ll make their day, cost next to nothing, and will make you feel great. Kind of like the real spirit of Christmas all over again, later on in the year, just by doing something nice for someone you’ve never met and won’t ever see again.