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Avoid Giving The Gift Of A Gift Card.

This guest post comes from Michael, a contributing editor of the Dough Roller, a personal finance and investing blog, and Credit Card Offers IQ, a credit card review site.

Every year, there are certain dates on the calendar where friends and family expect to receive a gift. Whether it’s Christmas, Valentines Day, a birthday or some other special occasion, the gift buyer can go through a stressful time in looking for the perfect gift. Part of the gift itself is the pain and suffering that others have to go through in order to get you something, and I’ve always been of the mind that giving cash was a cop-out; something that meant “I really didn’t want to think about your gift, so go buy whatever you want”.

Instead of giving cash, at least for the last few years, I’ve been on the gift card bandwagon. Best Buy, McDonalds, Chili’s “¦ the list of cards I’ve purchased in the last few years is quite long, and I’ve always felt good about giving it to others because I know it’s something they will use. But then I got to thinking, “Not only is giving a gift card like giving cash, it’s a specific kind of cash, which is even worse.” One of my 2010 New Years resolutions was to never again buy a gift card as long as I live and the evidence would suggest you shouldn’t either.

giftcard

The gift card industry is a billions of dollars a year business and almost every retail outlet in the country offers a gift card or gift certificate. Generally, there are two types of gift cards available:

  • Retail Gift Card (Closed Loop Card) ““ These are the cards you will find at the counters of your retail stores, which are only redeemable at that specific merchant, or their respected website. There are usually no fees associated with these cards and a good chain will not have an expiration date on when you can cash their gift card in.
  • All Purpose Gift Card (Open Loop Card) ““ An all-purpose gift card is usually issued by a card processor like Visa or MasterCard and carries an abundant amount of fees. Activation fees, usage fees, termination fees, monthly fees; it could very well be renamed a fee card instead of a gift card.

Like with any gift, I can expect some kind of depreciation after I buy it but some gift cards are so far over that line, it’s no longer visible. In 2006, Consumer Reports found that $8 billion in gift cards went unused from a year before. EIGHT BILLION. Thousands of consumers were given gifts that not only were forgotten but also are now worthless and can never be used. Credit card merchants and processors are making millions and millions of dollars on consumers each year without having to do anything other than making gift cards.

Then there’s the principal of the matter; giving a gift card because you can’t think of anything else. You are forcing people to buy things they don’t necessarily want or need and sometimes they buy things that are more expensive than the gift cards you give, making them spend their own money in the process. Why waste my time in driving to a store and buying a gift card, then your time driving to a story to use the gift card when I can just as easily give you cash that is good anywhere and everywhere.

So now I’ve rightfully returned to the gift and cash giving experience, not even giving gift cards a second look. Never again will I worry if my money is donated to retailers and credit card processors and I now get to spend 3 weeks tormenting myself to find the right gift, like my father did and his father before him. Feels good too be back to my old ways.


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Comments (14)

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  1. Ted says:

    I love this post! I hate receiving gift cards as I tend to not have them when I need them, underspend leaving a few dollars on each, or overspend ruining the gift buying experience.

    The only gift cards that I do enjoy are Itunes gift cards or target gift cards. I do not buy a lot of music so a gift cards gives me the freedom, allows me to add it to itunes easy, I wont overspend. Target is great as we shop there for our household goods and children’s things. You just add it at checkout and pay whatever you have left as we normally would. Woo hoo gift cards!

  2. Annie Jones says:

    I think this is odd because I LOVE receiving gift cards and usually spend them as soon as I can after I receive them. I will treat myself to items with a gift card that I wouldn’t normally buy with my own money. I especially like cards to craft stores, book stores and any kind of restaurant.

    Many people in my family ask for gift cards instead of actual gifts. They always appreciated and redeemed quickly.

    I’ll not be giving up the gift card trend any time soon. However, I am careful about the cards I give. I won’t give a card from a business I feel might be on shaky financial ground.

  3. PA Mom says:

    I love getting gift cards from Amazon or Ebay, but really dislike Visa gift cards. They always seem to cause problems at checkout. Cashiers can’t seem to figure them out.

    Amazon and Ebay are so easy and you can use them right from home… and for such a wide variety of things that I think those two are still worth giving (if you know the recipient shops online).

  4. Brandy says:

    I love getting gift cards. I request them from certain places I use. Even if its not a place I would use I would pass it one to someone who would but gift cards are great for people that want to get you something and they dont get your taste or you dont need anything really but they want to get you something. I always use my giftcards quickly, never hang onto them.

  5. Paul says:

    I hate giving and receiving gift cards for the very same reasons! Good post Mike! I wish more people thought about gift card like that.

  6. Social comments and analytics for this post…

    This post was mentioned on Twitter by hank_MiB: My Two Dollars: Avoid Giving The Gift Of A Gift Card. http://bit.ly/9HTpg0

  7. I don’t know, I love getting and giving gift cards–as long as they are to the right place.

    For example, Walmart, Target or the grocery store. Who couldn’t use these without buying something they didn’t want/need? Better yet, a gas card.

    Forget about the tackiness, I’d take a gas card over an ugly tie any day of the week.

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  9. Bucksome says:

    I’m with Annie, Brandy and David. I love receiving gift cards and also give them sometimes as well.

    The secret to a successfu gift card gift is that it is to a place the recipient really likes and can use. My older parents have everything they need, but not a lot of extra money.

    Gift cards to their favorite restaurants allow them to dine out once in a while without breaking the budget.

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  11. Julie says:

    A gift card is a gift and the recipient should be grateful to get any gift intended with good will. I hate the idea that you have to get the ‘perfect’ gift. People should be grateful to get anything at all.

    I think that the idea that a gift card ‘forces’ people to buy things they don’t want or need is ridiculous. If they don’t use it, it doesn’t change the fact that it was given. Plus, if they really don’t need anything, they could always use the card to buy a gift for someone else or something to be donated to charity.

    I love gift cards and would be happy if that’s all people ever gave me. To me, it says, “I know you like this store, but I want to enable you to pick something out that you really want.”

  12. i love receiving gift cards and also giving it to someone close to me, my friends and family. If it’s their birthday then i don’t have to buy presents and wrap them using cash or credit card, instead i just give gift cards so they can buy what they really want.

  13. Annie Jones says:

    I’m happily accepting any and all “insults”. I especially like general purpose insults like those from Wal-Mart, Target, etc., but specialized insults are also welcome.

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