If you're giving gift cards this Christmas, read on. If not, well, this article isn’t for you.
Gift cards have become HUGE. Retailers of all stripes love them, and why not? These babies make a ton of money for them. Don't get me wrong, gift cards have many up plusses. I'll get that in a minute, but being a Frugal Yankee, we don't want you spending any more money than you have to, but first a few facts
Last year, Americans spent over $80 billion on these ubiquitous pieces of plastic. This year that number is expected to grow. Of last year’s number, 10% or $8 billion went unused. One survey estimated there are 2 unused gift cards in every house in America. It is also estimated that over 23 million cards are unused. All of this is pure, unadulterated profit.
Check this out. Do you know what the industry calls this cash windfall - breakage. Breakage!? What's breaking? Plastic doesn't break. I guess using the name 'breakage' is better than calling it what it really is, “my big fat cash cow.”
Here's another reason why retailers love these babies. When a customer gets a gift card, they usually spend even more. For example, let's say you were given a $50.00 gift card. You go to the store and buy a $70.00 item. So the card spurs sales higher. On the flip side, other folks will buy a $44.00 item with that same $50 gift card and the remainder collects dust in a drawer someplace. Heck, that's more pure profit.
Let’s remember, when there is money to be had, there are some very bad deals out there. The savvy and vigilant Frugal Yankee has a few pointers. First, always read the fine print. Some gift cards have expiration dates. Expiration dates on what is essentially cash? Go figure.
Be careful, some gift cards have maintenance fees. These fees are often from a bank or credit card company. A rule of thumb is to avoid either one when it comes to gift cards, or be extremely careful. These guys are sneaky and looking to pad a profit center. They don't care about you, the customer, unless your money is heading their way.
Some other tricks these greedy dogs try are activation fees, shipping fees and restrictions on when and how you can use them. Like I said, be sure to read the fine print.
Of late, some states have made it more difficult for these practices to happen, but state-to-state differences are enormous. My advice is don't count on the state to help you, be proactive.
One last warning, don't buy gift cards off of Ebay or any other auction site. Many of them are scams or, the sellers are fronts for stolen cards. Use legitmate, local businesses to buy your cards.
With all that being said, gift cards can be a smart present. They're great if you know the person and know a store they really like. They are good for teenagers who, as most of us know, are difficult to please. I think they are also a good gift for a young couple. Getting them a gift where they can buy something they would not normally be able to afford, is an excellent idea.
Gift cards are a good last second purchase. You can do it on-line. They will be shipped for you, nice and easy. Remember, gift cards work best at specific stores, usually local, for specific reasons and be sure to read the fine print. That being said, "Enjoy life, spend less!"
You can find our more about Gift Cards at FrugalYankee.com.
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Comments: 32
Now you are stuck buying more most of the time just so it doesn't go to waste.
Eddie Bauer (I will name this one) gave me the amount under $5 as cash when I did not use the full value of one card I received. I shop there anyway ... but that encourages me to give their gift cards.
Thanks for your list of cautions. Used correctly, gift cards can be great.
I also read some time ago that you shouldn't buy cards that hang on pegs out in the open where the card number is easily read/copied. It seems that you can write the number down and use them on-line in some cases. Seems people had received cards that had already been used by less than honest people in this way.
Thanks for the info.
I think the best way to go is to be very choosy in where you get the gift card to for the person. For instance, Great Aunt Sally might like steak, but is she really going to use a gift card for $10 for Outback Steakhouse?
Get an idea of what the person will actually use before committing to a gift card for the holidays. I know my brother goes to Home Depot a lot, because of work AND because he's fixing up his house. When I drew his name for Christmas, I knew he'd use the Home Depot card, so that's what I got him.
I got my dad the same thing- again, because I know he'll use it. I considered getting my parents a gift card for a dinner out, but I don't know where they like to go, or whether they would use it, so I opted to not do that.
Stores such as Walmart or Target are usually a safe bet with teens and kids because they have toys, clothes, movies, etc. Best Buy might work with most teens, but not all teens are techno-obsessed, so it might not work with all of them.
Be picky when choosing the right place, and ask for advice from the recipient before making a final desicion!
Love the little things!
If there were limitations on cards, that information was on a list which was continually updated.
Jan S. I like the idea of the fund raiser with gift cards. Has anyone else had success with that idea?
Hey folks, let me know if you get any GCs this year and lets discuss if they are good ones and bad ones. Maybe I'll make a list. Maybe I'll check it twice, then I can report who's naughty or nice. What do you think?
I really think there should be a rule that if you don't spend the entire amount of the gift card, the business should give you back the left over cash!