The gift card has become as much a holiday staple as the wreath, the office party and, with a little luck, a white Christmas.
The second-most-purchased present after apparel, consumers are expected to drop more than $26 billion on gift cards this holiday season, up from almost $25 billion last year, according to the National Retail Federation.
They are the most-wanted gift among women and ranked third by men, according to a new survey by Consumer Reports National Research Center. As many as 60 percent of holiday shoppers are expected to buy at least one.
Yet, $8 billion in gift cards have gone unused since last year, either forgotten in a drawer or eaten up by fees assessed to the procrastinators, the Consumer Reports survey found.
The unredeemed cards essentially become short-term, interest-free loans to the businesses that sold them.
“Gift-givers and recipients alike need to be aware of the pitfalls and make sure that precautions are taken so that the recipient gets the gift and not the retailers,” said Tod Marks, senior editor at Consumer Reports.
Despite criticisms that the one-size-fits-all slices of plastic make folks too lazy to spend time actually shopping for a gift, they are hailed by some as the answer to finding the perfect gift.
“We love them,” said Robin Nolet, a 51-year-old mother of five grown children who expects to buy at least one for each.
“About the only ones on my list that don’t want a gift card are the dogs,” the Parker resident said with a laugh. “Lord knows my children don’t want me to buy them clothes, and as they get older, they have certain tastes. I’m not sure where they shop, so it’s a great idea that they can go where they want.”
The average shopper will buy between four and five gift cards, spending more than $156 on them, up from $146 last year, according to the National Retail Federation.
Yet, more than a quarter of the gift cards purchased during the 2005 holiday season weren’t redeemed until the following Christmas, according to a Corporate Research International study.
Consumers can get caught by a variety of balance-eating fees that peck away at the card’s value, in the worst cases leaving them with little or no gift.
“The other day, we found one card we hadn’t used within the first year and learned it was charged $2 for every month it went unused,” Nolet said. “It can really be an issue if you don’t use them promptly.”
Consumer Reports found that cards are unredeemed because people just didn’t have the time to shop or couldn’t find anything they liked. And then there were the one-in-14 people who said they had lost the card or it had expired by the time they thought of using it.
Nevertheless, surveys show people really want them.
“Many consumers pulled back on spending for themselves this year and are hoping to receive a gift card so they can purchase something they may have had their eye on for months,” said Tracy Mullin, National Retail Federation president and chief executive.
Merchants love the cards because, if they’re redeemed, better than 60 percent of the shoppers will spend more than the initial value of the card, so a $10 gift could easily mean a $25 sale, according to the Consumer Reports survey.
Still, not all things related to the gift-card industry have been good. There have been some notable examples of well-known chains, Kmart and the owners of Olive Garden and Red Lobster among them, being admonished by the Federal Trade Commission for deceptive practices involving gift cards.
Earlier this year, Kmart was slammed for promoting its card as being like cash, yet not disclosing the fees assessed for cards not redeemed promptly — even though the company represented that the cards did not expire.
Consumers need to be wary of the various ways gift cards can be depleted. There are often fees for the initial handling or issuance of the card, or a monthly dormancy fee where the value of the card gradually decreases until it is used. There are times when a card has an expiration date — when the balance of the card is forfeited to the retailer — and some issuers invoke a fee to reinstate an expired card.
Other fees can include usage charges for actually redeeming the card or fees for making balance inquiries or replacing a lost or stolen card.
Some cards allow the holder to “reload” them, or add to the balance, at any time — for a price.
“The bottom line is people should be as careful about buying a gift card as they are with any other gift,” Nolet said. “You have to be aware of the terms and not stick them somewhere that you’ll forget about them.”
David Migoya: 303-954-1506 or dmigoya@denverpost.com
How to get the most out of your gift cards
More than 139 million Americans purchase or receive gift cards each year, the bulk of them during the holiday season. Here are a few tips for the givers and getters of one of the season’s most popular presents.
Check the store’s pricing. It’s annoying to get a $25 gift card for a store that sells little at that price. Find out what things usually cost and get a card for at least that value.
Register the card. Many cards allow online or phone registration to protect them from theft.
Use it quickly and to the last penny. Avoid fees for inactivity and shop after-holiday sales. Ask the merchant to do a “split-tender,” which allows you to split the purchase price between the remaining amount on the card and your cash.
Know all the fees and rules for using the card. Some issuers limit whether you can use the card in-store or online. Others might deduct for checking the card’s balance.
Avoid buying cards at auction. Online auctions are notorious hotbeds for stolen cards and numbers. Buy only from the issuing store or bank.
Ensure protective stickers and scratch-off coverings for PINs are intact. Missing security items likely mean the card has been tampered with.
Avoid cards on unsecure store racks. Gift card numbers that can be used by thieves are less likely to be swiped when behind the sales counter.
Treat the card like cash. Many issuers will not let you replace a stolen or lost card.
Write any expiration date on the back of the card. You won’t forget it if you pull the card out months later if it’s written down.
Popularity soars
$24.81 Total holiday gift-card spending (in billions) in 2006
$18.48 Total holiday gift-card spending (in billions) in 2005
$17.34 Total holiday gift-card spending (in billions) in 2004
Source: BIGresearch and the National Retail Federation
“About the only ones on my list that don’t want a gift card are the dogs.”
Robin Nolet, mother of five grown children
