Better To Gift Card Than Receive A Present?

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Less than two weeks now before Christmas and it's getting to be crunch time, so gift cards are a popular and easy option, but you might want to think twice before convincing yourself they're the best option.

For the seventh year in a row, gift cards top the list of the most sought after Christmas presents and the ones people ask for the most give us an interesting glimpse into how our economy's doing.

For years, cards that can buy more practical purchases or necessities have been the big thing. Walmart, Target, Walgreens, Amazon, but now the trend is moving back toward more non-essential items, which means we're not banking on Santa to help buy necessities as much this year.

The top six most wanted gift cards for 2013 are Walmart, Darden Restaurants (Red Lobster, Olive Garden, T.J. Maxx, Starbucks, Home Depot and Costco. Walmart continues to dominate the list, but just behind is the company that runs Red Lobster and Olive Garden. It moved up 12 spots this year. T.J. Maxx wasn't even in the top 20 last year and now it's third. Starbucks moved up eight spots followed by longtime favorites Home Depot and Costco.

McDonald's dropped way down the top 20 list and Wendy's fell off the list entirely while more wholesome alternatives like Panera and Trader Joe’s cracked the top 20 for the first time.

It's hard to talk gift cards without looking to Starbucks, which has created a culture steeped in hype and it's worked amazingly well. For a second year, it’s made a limited number of metal cards that carry a balance of $400 but cost $450. Somehow, the 1,000 cards sold out in minutes. Days later, you can find more than 50 cards on eBay. Most of them have bids over $1,000 and some are selling for nearly $2,000, all a well-played marketing scheme to create an exclusive club of metal cardholders.

Starbucks is also making waves by offering gift cards you can send over Twitter, another brilliant marketing plan. If you accept a coffee card sent to you through a tweet from a friend, you give Starbucks permission to tweet on your account.

If you've received a gift card in the last decade, you might want to check your wallet or dig through junk drawers because somewhere out there we've stashed a combined $43 billion in unused gift cards. “Five years ago I got these from my brother, I still haven't used them,” says Rich Handel.

A group of Consumer Reports employees is hardly a scientific sample, but their experiences show why buying gift cards may be a waste of money. One woman had accumulated dozens of gift cards. “It's starting to become a burden. I would rather have cash."

“Believe it or not, it's estimated that $1.8 billion worth of gift cards purchased last year are gathering dust and are likely never to be redeemed,” says Consumer Reports’ Anthony Giorgianni.

While recent federal legislation requires retailers to honor cards for five years, monthly inactivity fees can kick in after a year, draining the value of the card long before it expires. “I actually had one gift card where all the money was gone by the time I tried like three years later,” says Olufemi Olu-Lafe.

Gift cards with bank logos like American Express or Visa can be used at a wide variety of stores, but there is often an activation fee or purchase charge, usually around $4 to $6.

"Lost cards are another headache,” says Giorgianni. "Several large retailers such as Abercrombie and Fitch, Puma and Aeropostale say they won't replace them. Other retailers may charge you a hefty fee."

For instance, with the Visa card you can get at Simon Malls you'll shell out $15 to replace a lost or stolen card. "One more drawback, don't expect the same fraud protections you get with traditional credit cards,” adds Giorgianni. Another reason Consumer Reports says use gift cards as soon as you get them.

Surveys reveal busy parents want the general purpose cards you can use anywhere. This is also your best bet if you're giving a gift card to someone with a high income, possibly your boss? Older folks tend to want store-specific cards, like to restaurants or department stores. And keep in mind those who are unemployed are least likely to get gift cards, though they made need them the most.


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