5 Tips for Buying Gift Cards

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Black Friday is three weeks from today, though you’d never know it. Been to any stores lately? I’ll bet you that they’re fully decked out in Christmas and other holiday decorations. Heck, I ran to the supermarket on Election Day and found employees at the local shopping center affixing giant wreaths and candy canes to the lamp posts. In addition, I read in the news that K-Mart was starting its Black Friday promotions today. It’s no wonder: retailers are quietly freaking out about lower-than-expected holiday spending.

There is one bright spot on the retail horizon–gift cards.

According to the National Retail Federation’s (NRF) 2008 Holiday Consumer Intentions and Actions Survey, consumers will have gift cards on their gift-giving brains once again this year. More than half (53.8%) of shoppers last year put gift cards on their list, and that number has increased slightly this year (54.9%). So you can expect that you are either going to be giving or receiving some gift cards this year.

I’ve said before how much I enjoy giving and receiving gift cards. While some people think that they are impersonal and the same as giving cash, I think they can be wonderfully personal–especially if you give a gift card to a retailer the recipient likes. Because when you do, you’ve given that recipient carte blanche to go on a shopping spree, courtesy of you. Plus, if you’ve got finicky shoppers on your list (read: my tween and teenage daughters), what they like today will change tomorrow. So unless you want to give the gift of having to return something, you might as well stick with a gift card.

In addition, I like to think of gift cards as a green gift, in that they come with minimal packaging. Also, some gift cards are biodegradable, such as the ones that Target offered last year. (If they have them this year, too, I’m totally buying a bunch for people.)

That same NRF survey asked why people like myself choose to give gift cards. Some of the results seem pretty accurate, based on my own opinions and experiences:

*gift cards allow the recipient to select their own gift (25.4%)
*gift cards are easier and faster to buy than traditional gifts (12.6%)
*gift cards help them stick to their budget (5.7%)
*gift recipients won’t have to deal with returning unwanted merchandise (5.1%)

The survey also found that some gift-card buyers end up making that purchase because of retailer incentives. I can tell you that’s very true. Recently, we splurged and enjoyed our first meal out at a restaurant in a long time. We went to my husband’s favorite place–Ted’s Montana Grill. While we were there we noticed a table card about a promotion that Ted’s was running: if you spent $100 in gift cards, you would get a $25 gift card for free. Bam, that would take care of much of our holiday shopping for friends and family nearby, and it would allow us to spend $100 on $125 worth of gifts. I’ve heard of other local restaurants offering similar deals

Now it isn’t all rainbows and butterflies for gift cards across the retail spectrum. Here are some reasons why people won’t be buying gift cards this year, according to that same NRF survey:

* gift cards are impersonal (22.7%)
* they would rather stretch their dollar by buying merchandise on sale (10.9%)
* they do not want to buy a card with expiration dates or added fees (9.8%)
* they don’t know which gift card a person would want (7.7%)
* they are worried the gift recipient will lose the gift card (3.9%)
* they are worried the retailer will go out of business (3.1%)

The last concern turned out to be very true for people who bought gift cards last year from The Sharper Image, which declared bankruptcy after Christmas and stopped honoring gift cards, and certain chain restaurants, like Don Pablos, which simply shut its doors and went out of business all together in less than 24 hours. (Some customers were able to get cash refunds for worthless gift cards.)

If you’re like me, you are probably seriously considering giving gift cards once again this holiday season. So with Black Friday right around the corner, I thought you might find the following 5 Tips for Buying Gift Cards (based on an NRF tip sheet on the same subject) helpful:

1. Know the difference between retailer and bank-issued gift cards.
Shoppers should be aware that there are big differences between store-issued and bank-issued gift cards. According to NRF, none of the gift cards from the nation’s 25 largest retailers (including Costco, CVS and Target) have expiration dates and 84% have no fees. On the other hand, gift cards from banks, malls or credit-card companies are more likely to have fine-print rules you need to read.

2. Buy gift cards from reputable retailers.
To ensure that a recipient receives the card’s full value, shoppers should only buy gift cards from reputable retailers (not online auction sites). Gift cards sold through online auction sites are more likely to be counterfeit or obtained fraudulently.

3. Spend your gift card, don’t save it.
While most retail-issued gift cards do not have expiration dates, some retailers may deduct a “service fee” from gift cards that are unused a year or so after purchase. In other words, the longer you hold on to a gift card, the smaller the value on the card can become. That’s why creating and keeping a gift card wallet with you at all times will help ensure you get the full value out of all of your gift cards.

4. Personalize your gift card.
When giving a gift card, make the gift card more personal by packaging it with other small items you know a person would like. Enclose a movie theater gift card with candy and popcorn, or add a pair of earrings with a gift card for a clothing retailer. Personalize the gift even more by buying a gift card from a retailer that allows shoppers to design their own cards with personal messages and photos. One such online retailer is Cardways, which lets you upload your photos to gift cards, sort of like how Stamps.com lets you use your own photos to create one-of-a-kind (and legit) postage stamps.

5. Keep your receipt.
Some retailers are able to reissue a lost gift card if consumers have kept the original purchase receipt. I find that enclosing the receipt, sort of like a gift receipt, is helpful if you’ve bought a gift card off of one of those gift-card kiosks you find in supermarkets and drugstores. Because the cashier is supposed to have activated the gift card when you bought it, enclosing the receipt with the gift card will allow the recipient a back-up plan should the card end up not activated. (Unfortunately, that back-up plan is going back to the original retailer where you purchased the gift card, with the receipt, so that the store can activate it for real.)

If you’re interested, I’ll try to write again about gift cards–especially how they make for excellent teacher gifts. Post a comment to let me know your interest.

9 thoughts on “5 Tips for Buying Gift Cards”

  1. Leah, this is great stuff. I learned a lot! It really pays to be careful when buying gift cards.

    I’ve added a link to your post over at Parent Talk Today, because we’re talking about gifts of money and gift cards for teens. Here’s the link to the post: http://tinyurl.com/5apvoc

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  2. Gift cards are a great gift! It makes sense too, you let someone pick out what they need or want. They can add more money to it. I personally hate getting stuff I won’t use an dI ALWAYS feel bad exchanging.

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  3. I like #4: wrapping the gift card in a creative way. Now that Target carries the Converse shoe line, I’ll get my daughter a Target gift card and wrap it in an old Converse shoe box!!

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  4. My husband’s absolute favorite gift is a gift card for itunes. It’s green, it’s fun, no traveling involved, no packaging, and it helps him with his profession (he’s a music teacher).

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  5. I don’t think gift cards are that “green” actually — they don’t sustain the local economy or support independent retailers, and they are encouraging people to drive to these chain stores and get mass-produced stuff that has a lot of packaging. Just my $.02.

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  6. Peter of Lone Trees:

    What does this have to do with gift cards? FYI, sounds like you’re quoting from an article in yesterday’s Wall Street Journal.

    Leah

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  7. When I was last at Costco, I noticed they had a deal to get 5 $25 (or maybe 6 $20?) Starbucks GCs for $99.99 or something. Seemed like a good thing for teachers and other small gift recipients.

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  8. Leah, an article you might want to check out for reference’s sake is at the Financial Armageddon(!) website entitled “The New Substitution Effect”. The article that blogmaster Michael Panzer quotes begins: “When Summer Mills visited her local CVS drugstore recently, to save a few dollars she bought the store-brand facial scrub rather than the Olay version she normally uses.

    “I thought I’d be able to tell the difference, but I couldn’t — I looked at the ingredients and they seemed almost the same,” says 30-year-old Ms. Mills, a stay-at-home mother of two in Ardmore, Okla. On her next shopping trip, “I’m going to buy the store-brand moisturizer and cleanser — it’s less money.”

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  9. I love gift cards.

    For teacher gifts, we give cards and a small treat. I usually go with a theme, such as an afternoon of reading and relaxing (book gift card + cocoa + cookies).

    And, I love it when people buy my family gift cards. Especially this year, since we’re moving in February and it would be easier for us if we could just save the gift cards and shop after we move.

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