Are gift cards better for you — or better for the business?

Ask Richard Brigleb about gift cards, and he’ll tell you about the $200 worth of plastic for a wine store and local restaurant he just found in his kitchen drawer.

“I had totally forgotten about it,” says Brigleb, a retired dentist from Fairfax, Va.

But ask him if he’ll buy gift cards for friends and family this holiday season, and he offers a shrug.

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“Gift cards are a great idea,” he says. “But why not just write a check?”

Good question. The gift card industry is expected to account for $140 billion in spending this year, or about 14 percent of gift giving, according to a Fung Business survey. New research by the Retail Gift Card Association (RGCA), a trade group for the industry representing closed-loop gift cards — scrip that can only be used at a single business — suggests consumer demand for gift cards is rising this holiday season. It found 76 percent of U.S. shoppers plan to buy plastic gift cards this year, up from 70 percent in 2014 and 73 percent last year.

“Gift cards are consistently a favorite choice in the U.S.,” says Timm Walsh, RGCA’s board chairman. “Americans love to give them and receive them.”

But should they give and receive them?

Maybe, maybe not.

There are, of course, several benefits to gift cards. They include:

They’re easy.
A gift card is convenient, particularly for the folks in your life who you don’t know personally, like teachers, babysitters or newspaper carriers “You can save yourself a lot of guesswork by getting gift cards,” says Cathy DeWitt Dunn, a financial professional from the Dallas firm of DeWitt & Dunn.

They can help you save money.
Companies are pushing gift cards aggressively, so they may offer discounts when you’re buying or redeeming them, says Michael Foguth, founder of Foguth Financial Group in Brighton, Mich. “Some large box stores will give you a percentage off your order if you throw in a gift card with a minimum set value,” he says.

Everyone wants one.
They’re in high demand. Also, they offer a lot of flexibility and they don’t expire, thanks to federal law, says Kendal Perez, a savings expert at Plus, they can be re-gifted. “Receiving a gift card you don’t want is disappointing, but you can use that card to boost your holiday budget and re-gift it, or use it as currency to buy a gift for someone on your list,” she says.

Talk about a win-win, right?

Not so fast.

Gift cards have a few negatives, both obvious and not-so-obvious. You need to know about them before exchanging your money for scrip.

Gift cards are almost too easy, says relationship expert April Masini.

“Many people feel that they’re impersonal and cheating on the process of deciding on, shopping for and finding, wrapping and presenting the perfect present,” she says. “If you’re someone who makes their own jam, knits their own scarves and packages their own Christmas fudge in the kitchen before hand-delivering charming artisan presents, gift cards will reek of cheap ease.”

Gift cards have fees that may not be immediately disclosed. For example, Dennis Tucker, a librarian from Stockton, Calif., noticed a $2 “maintenance fee” on his American Express gift card recently. The company refunded the fees after I asked about them.

“Certain gift cards — mainly ones that act as prepaid credit cards — also have an activation fee associated with them,” warns Katie Ross, an education and development manager for the American Consumer Credit Counseling, an organization that offers information and guidance on issues such as identity theft, credit, debt and budgeting. “This makes the gift seem less valuable and can leave the recipient feeling annoyed.

Also, gift cards can get lost, and if they do, your money’s more or less gone. “Gift cards are forgotten and don’t get used,” says John Ruhlin, author of the book “Giftology: The Art and Science of Using Gifts to Cut Through the Noise, Increase Referrals, and Strengthen Retention.”

In fact, the “breakage” rate — an industry term for revenue gained by retailers through unredeemed, expired or lost gift cards — is off the charts. About $1 billion worth of gift cards aren’t redeemed every year, a fact companies know.

That’s why they love gift cards. It’s lost — and found — money.

Perhaps the most unpublicized gift card drawback is the rampant abuse, which happens on several levels. Not a week goes by that I don’t hear from someone who tried to use a gift card either purchased under questionable circumstances or who claimed a gift card credit was stolen, only to be resold under equally questionable circumstances.

Gift cards are favored by hackers as financial instruments used to collect troves of loyalty points in an unethical way or by thieves who just want to steal your money. Consider what happened to Chii Biao Fong, a software engineer from Milpitas, Calif., after some of his Target gift card credits were presumably stolen. Target would not restore them until I asked about the problem. Others are not so lucky and lose everything.

So how do the experts do it? If you don’t have a specific, thoughtful gift in mind for that special someone in your life this holiday season, maybe you should consider doing what grandma and grandpa used to do when you were younger, says Kyle O’Dell, a managing partner at O’Dell, Winkfield, Roseman & Shipp, a retirement planning firm in Denver.

“How about a good old fashioned check?” he asks. “We were never upset while growing up when our grandparents would give us cash or a check for our birthday. Hard cash or a check will get used almost all of the time.”

Indeed, a 2013 survey by St. Leo University found that a surprising 41 percent of respondents would prefer to receive cash instead of a gift card.

Maybe there’s a silent plurality who knows gift cards aren’t the amazing financial instruments so many experts claim they are.

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71 thoughts on “Are gift cards better for you — or better for the business?

  1. I use gift cards for my own purchases when I can buy them for notably less than face value. I don’t give them as gifts, though – cash is superior.

    1. For certain eateries and retail stores I use gift cards almost exclusively for my own purchases there for the same reason: I can buy them at a fixed percentage under cost.

  2. Gift cards are like credit cards, when used correctly and judiciously they can be a wonderful tool. When abused or misused, they easily fall into disfavor.

    I find gift cards are a convenient way to express appreciation to someone. Especially when that someone is perhaps a casual acquaintance, and not a close friend. I also find them to be an excellent way of rewarding someone who has performed above and beyond in what they have done for you.

    I find them somewhat awkward when used in the context of a close friend. I have some issues understanding how “Dick and Jane” can be my “dear” friends, yet merit an impersonal gift card as an expression of our friendship.

    In context, and when used correctly, they can be a great asset.

  3. While I’ve always assumed that “breakage” (great term!) was a significant factor, I’ve also wondered about the liability-on-the-books aspect. This is allegedly one of the (several) reasons airlines, for example, want to expire miles: because they have to show this huge theoretical liability on the books. Wouldn’t that be true of gift cards, too? OTOH, unlike miles, it’s actual capital to play with! (And “maintenance” or “inactivity” fees clearly are aimed at cleaning them up.)

    1. That may be true, but the person that gave you the check you lost can place a stop payment order on it and give you another one. Try calling up Bed Bath and Beyond [or your store of choice], tell them you misplaced a gift card you received from someone else and see whether you get a replacement card. I would tend to think not.

  4. Almost every time I have received cash as a gift, it’s evaporated. It either goes to a bill, a drive-thru, groceries, family emergency, etc.

    When I receive a gift card, I know I’m forced to splurge on myself… and that’s a great feeling! For example, I am a video game nut. I know if I get a GameStop card, I won’t be tempted to apply it to a utility bill or to run to McDonald’s because I got too lazy to cook. It WILL go to something I enjoy.

    1. I’m kind of like this for myself, too. My Dad used to always send us a check for Xmas. Into the bank it went and who knows what it was spent on…bill, someone else’s gift, etc.. it never felt special or like something for “me”. Now, his wife sends me a gift card to my favorite spa and I have a day of ME which feels so much more special.

  5. I love gift cards, both for myself and as gifts. I only give them if I know that the recipient likes to shop at that particular store. (I don’t buy Visa or Amex gift cards, only store cards.) I don’t think it’s impersonal at all. Some people are hard to shop for, some people would rather pick out their own stuff, and sometimes it’s difficult to find just the right item for someone. The only downside is that the recipient knows how much money you spent.

  6. Gift cards for me have their place. For my college aged niece and nephew, they’re a great way to give them a little monetary boost in the care packages that I send to use for needed items or just a pizza splurge–without them having to find a banking branch near their location with no car. I buy Visa Gift Cards at our local credit union (they only charge $2) and they can be registered and replaced if lost or stolen and they can track their balance and purchases, as well. I don’t often purchase specific store cards unless I know it will be welcomed and used. When my daughter and her wife moved into their first apartment recently, I gave them $500 in gift cards to BB&B along with a 20% off coupon. I knew if I gave them cash, they’d feel like they had to be “responsible” and put it in the bank and continue using their second-hand ratty towels, sheets, etc… They absolutely were delighted splurging on cushy towels and decorating their new place and I know they wouldn’t have had as much fun with cash–so I sort of “forced them” to be generous to themselves. For weddings, I either give a check if I’m mailing it or a couple of brand new $100 bills if I’m traveling to attend and don’t want to lug a gift. Cash for the honeymoon always seems appreciated, although I do prefer to buy an actual gift if I can transport it easily to the venue.

    1. Gift cards also make great last-minute gifts, especially e-gift cards. I’m in California and one of my nephews is in Illinois and my other one is in New Jersey. Both had a birthday recently (which I almost forgot about). I went on Chipotle’s website (one of their favorite restaurants) and ordered e-gift cards for both of them. There’s very little chance of hacking (except if the messages get hacked between the time it leaves Chipotle’s server and my nephews’ e-mails).

          1. I prefer the local non-chain joint where everything is made from scratch; you gotta wait for it to cook. Genuine Mex food; not factory-type.

            Good idea; I’ll go there today; haven’t been in too long a time.

  7. who uses cheques in 2016 ? USA get your antiquated banking system out of the 20th century. Most banks in Australia now charges to accept a cheque. Got a cheque(you guys should learn to spell) last year & bank charged us a $7 to bank it. No one uses cheques in Australia anymore. Internet banking is here.
    Back on topic, with the massive 2017 recession, just around the corner, I’d be using any gift cards fast, before that business goes out of business & you become an unsecured creditor. good luck with that & big businesses go out of business as well as small ones.

    1. I work overseas most of the year, and I wouldn’t be able to do anything with a US check overseas, except remote deposit it on my iPhone.

      1. Nobody ever said one size fits all. Clearly there are situations (such as yours and the Aussie’s) where checks are difficult to deal with. Of course, gift cards might be also be difficult if the recipient lives overseas.

        1. That’s actually true, Starbucks gift cards in Japan for example aren’t transferable to the US. While the kids liked the design, they were purchased in ¥ and they were just invalid when they attempted to register them.

    2. The ‘Muricans DO spell it correctly, as they have taken over the language, simplified it to the simplicity the average ‘Murican’s mind, and don’t use antiquated FRENCH words where precious alphabet letters are wasted needlessly. Internet? HACK? yup…… Bank charged you $7? Change banks. PAPER TRAIL is good. Oh, let’s examine the paper to see if it was forged. You bank them? ‘Murican’s DEPOSIT them. Maybe some folks SUPPOSIT them?

      1. point is no one in OZ uses cheques anymore. So old & labour intensive & labour in Australia is very expensive, far more so, than in USA.

        1. Yeah, and the water goes down the drain clockwise there. Ha ha.
          Is labor expensive because people actually WORK at their jobs there?

          1. no the opposite. Millions get unemployment, many go surfing & get paid for it. SO those who actually work, want a lot + we don’t have Mexicans.

          2. Most of our Mexicans are hard-working. It’s the political whores of both cabals who want them in as undocumented so they can exploit them. Some of our Mexicans are criminals, and we shoot them.

  8. Another use of gift cards is for coworkers. My wife buys gift cards as holiday gifts for her employees, rather than cash, because the amount is too small to seem like a bonus (and they get a bonus, just at a different time of year), but it lets them feel a little festive.

        1. I don’t know any, not here in Japan anyway. I know people who don’t like Starbucks coffee or many of its products, but it’s one of the few places that offers free public WiFi, so while they don’t like the product, they love the “space”.

        1. most big coffee houses blend good coffee with crap. They just have to be careful how much crappy coffee they put in. It’s so stupid, that people carry on about coffee & most end up drinking it out of plastic lined carboard takeaway cups, thru a plastic lid. Did it ever occur to any of them, that a hot fluid in soft plastic means you are drinking plastic ? No wonder cancer rates are increasing.

          1. That’s true, they stopped using wax years ago. There is a thin plastic liner on the cup inside. However, I bring my own container and it’s aluminum with a ceramic lining.

          2. I’ve been buying my coffee from Ammirati in NY for over 50 years. I bought from Dominick, then from Tommy, and now from grandson Joey. It’s good stuff. Joey came up with a new 2250 blend which is as tasty as the heavy agida-producing roast, but doesn’t kill ya. I have an account. I call Sophia, and she sends me a crate. Everybody mooches it offa me.
            I almost NEVER buy coffee out. I get my wake-up juice at home, and usually 2 are enough. When I travel, I bring a small machine with me, unless I’m going to visit civilized people, where I don’t need to bring a machine.

      1. The problem for her is that her coworkers don’t drink coffee, so they would hate those (but if it works for you, great).

          1. No you are a traitor and a member of the rebel alliance. How can you disparage such blasphemy on that which is the glory of Starbucks.

          2. Two thirds of those people are dead, which would likely have been averted if they had some Starbucks that morning.

      2. Starbucks gift cards are great even if you don’t drink coffee. They have a large selection of teas, smoothies and food.

        1. They don’t have a “large” selection, but they do have a selection. I keep hearing about experimental Starbucks that have a wine bar or are doing a full service breakfast. A lot of people here in Japan would love that. They will line up down the street for blocks on Sunday morning for breakfast at “Egg and I”.

          Honestly though outside espresso drinks and frappuccinos (which is honestly a shake), their teas are nothing spectacular. Their food is no better than most of the stuff you would get at a conbini or 7-11. They have a couple smoothies and you can get creative with their base mix and fruit and concentrates, but they aren’t a juice bar. The big thing over the summer was the blended pink drink with a bannana.

          1. I don’t go to those places. When I’m in Japan, I find a place where it’s all Japanese people, where likely they don’t speak English, and they have real food. I point. They take coins and shove ’em in a machine and push the plunger and take the ticket and then bring me something good to eat. OR I’ll go to a dumpling emporium and gorge…..

  9. Why even bother with a check which involves writing or cash which involves using a bank or ATM, and with both of them you need to buy a card or something to put the check or cash into. You can send people money by transfer from your account to their account, then send them a virtual card by email.
    I do this for all the kids and teens in the family at holiday time. The only actual physical gift these kids would appreciate is a new iPhone, and I don’t love them that much.

    My mother and father get real gifts, my father I shop for, my mother I make for.

      1. I have a Mont Blanc fountain pen, but many of the children in my family do not know how to ‘write’ (as in cursive). They are taught to print, and then when signing a document to connect the letters with arcs and lines. Compared to my fiance’s family who is Japanese and is required to know and physically produce 2000 characters to be considered literate and 5000 characters for university graduation.

        Antique fountain pens, those without negative pressure systems can be exquisitely beautiful, and comforting but as a practical matter they tend to leak and their nibs often to soft or to hard, creating fluctuations in ink flow.

        1. I have one which, in its day, was a cheap gubmint pen. Has a well and sits in it. Writes beautifully.

          Ya think the characters are hard? There’s a system; you need to know the magic decoder ring as to how it works. Just watch ’em use a computer! When my friend hits town from Yokohama, I have the Japanese loaded on the computer for him to use. Knowing the system allows ’em to use a pull-down, which is triggered by the first few strokes of the pictogram. Once they hit a few strokes, they can get the pull-down and usually their word is at the top of the list. if not, they scroll down, and select it. They’re quite fast at it.

          1. Typing in Japanese isn’t difficult, hand writing the characters can take significant talent. The number of strokes, pressure during the stroke. It’s not something you can just connect some lines together and done.

          2. Yup.. Studied Chinese. Essentially similar how it works.
            Teachers in grammar school always told me my handwriting was terrible, like a “Chinaman”. [ Before Political Correctness. ]
            Chinese teacher told me I had a BEAUTIFUL HANDWRITING in Chinese. Go figure….. ha ha ha!

    1. the cash economy in Australia is booming. We have a 10% GST(goods & services tax) which has to be included in the price (doesn’t apply to medical or basic foodstuffs) unless business to business. But often you can ask for or be offered a 10-15% discount for cash no receipt. NOTE: our useless govt is nearly as bad as U.S. govt at wasting money & people here are getting sick of the massive waste.

        1. you don’t get out of paying GST if a company, you just don’t have to include it in your prices to businesses, so you can advertise price + GST. To consumers, the prices advertised MUST inc GST.

          1. The interest at current bank rates on a $50 gift card for six months is nineteen cents. I think putting some thought into a gift is worth nineteen cents.

          2. A thoughtful gift to my mind is a nice crisp new US Grant bill.

            How much is 19¢ X 100,000 gift cards, in the aggregate, to them? You wanna make them rich, go ahead. I’ll hand over General Grant.

          3. I only bought one card, Joe. Nineteen cents, take it or leave it. Who cares what it is to the business?

            When they spend that bill you sent, somebody’s going to make money then. I bet that’ll make your blood boil.

          4. I care. it adds up. One smart guy skimmed a fraction of a cent off many many transactions. he got caught by happenstance. He was getting RICH off fractions of a cent.

  10. Gift card: D-I-L got one for a nice pizza joint which has wood-fired oven. HOWEVER, rules of the card were designed to FORCE you to have FOUR people there, or come back; couldn’t use it all at once. Even tho it was very nice food, I haven’t gone back there no mo……. So, being sneaky and clever got them blocked from my radar. Stuff like that annoys me, and I vote with my wallet.

  11. I’m surprised that no mention was made of the “bonus” some places (restaurants, especially) give you when purchasing one of their gift cards. Around here (upstate NY) many offer an additional $10 card when buying a $50 card. That’s an immediate 20% return. What am I missing?

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