5 Reasons to Avoid Gift Cards

I recently did some research on gift cards for my weekly TV segment on the FOX morning show in Nashville, and I ran across a curious piece of data: This year there will be approximately 20 percent more people giving gift cards than there will be people wanting to get them! That stat struck me, and I wondered why. Then it occurred to me: Maybe people give gift cards because they’re easy — and require little effort. While the giver finds giving gift cards easier, some recipients don’t like them because they can be a real pain.

Let me share a few things to consider before selecting a gift card this season:

1. Unlike the old-fashioned gift certificates, gift cards may leave you with a wasted balance. Do you remember the old gift certificate that your grandmother gave you for $20 for merchandize at the toy store? If you bought something for $18, they gave you the remaining $2 back in change. But, with a $20 gift card it doesn’t usually work that way. If you spend $18 of its value you’re simply left with a $2 credit. Many of these $2 credits never get spent — thus leaving retailers millions of dollars in “free” money. Or, consider this scenario: you find yourself trying to “use up” the remaining $2 by buying something for $8 that you really don’t need.

2. Beware of bankrupt retailers. As the economy worsens, many retailers will close their stores. If you get a gift card from a retailer that closes, you’ll most likely be out of luck. There aren’t a lot of laws protecting consumers in this area. If you are given a gift card, consider using it quickly. The week after Christmas is usually a great time to find bargains. For a list of retailers to avoid purchasing gift cards from, check out Ellie Kay’s recent article Gift Card Warning!

3. Some gift cards have expiration dates. Even if a store is not going out of business, some gift cards may expire after a certain date. While many store cards do not have expiration dates, according to Bankrate.com you may find that the Visa or Master Card you give expires within a year or two. And some may begin charging a monthly service fee after a year or two, which leads into point #4…

4. Some gift cards charge fees. Once again, many store cards don’t. But often the Visa, Master Card, and Mall cards do. These fees (frequently $3-$5 per card) can add up in a hurry.

5. Think about giving gift cards for essentials. So you still want to give gift cards for Christmas? With more people losing their jobs, consider giving “practical” gift cards. Give a gift card for groceries, gas, or even to help pay utilities.

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