There are a few things you can count on every year during the holidays: time off from school; an overweight, bearded out-of-towner breaking into numerous houses in the neighborhood via chimney; tone-deaf neighbors showing up unsolicited to sing at your doorstep; embarrassing antics at office holiday parties; eating a bit too much; and, of course, gift cards.
For the fifth straight year, gift cards are the most sought-after type of holiday present, according to the National Retail Federation (NRF), with nearly 60% of consumers hoping to receive one this year. Unfortunately, for most of us, the holidays are also about penny pinching and making our funds go as far as possible, evidenced by the fact that 62.2% of Americans say the economy will influence 2011 holiday spending habits, according to the NRF. Understanding the gift card market and finding ways to save are therefore imperative, and in recognition of this fact, Card Hub has created the following list of 8 Things to Know about Gift Cards this Holiday Season:
1. Wish lists lead to better gifts: While gift cards naturally increase the chances of better gifts, given that they can be redeemed for anything from the store to which they are affiliated, this potential is wasted if you receive cards for stores you don’t like. The ability to create a list of your favorite stores and share it with friends and family is therefore one reason why creating a gift card wish list leads to better gifts. In addition, gift card wish lists enable you to get more expensive gifts. Instead of getting ten different gift cards from ten random stores, as might be the case without a wish list, you can request cards from only a select number of stores, allowing you to pool your resources (i.e. use more than one gift card to buy a big-ticket item).
2. Unused gift cards retain value: 25% of consumers have unused gift cards remaining from last year’s holiday season, according to Consumer Reports. During tough economic times, we can all benefit by unlocking the value of these cards, which can be done in three distinct ways. First, you can sell unwanted gift cards for cash. Secondly, most stores allow you to trade in old unused gift cards for new ones, which is great news for re-gifting cards that have developed noticeable wear and tear as a result of sitting idle for years. Finally, most states have programs that allow you to recoup unused funds from expired gift cards under unclaimed property laws.
3. Discounted gift cards are available: 44% of consumers say getting a good deal on holiday gifts is more important this year than in 2010, according to Consumer Reports’ 2011 Holiday Poll. Luckily, discounted gift cards are available via online gift card exchanges, enabling you to save as much as 30% on popular gift cards.
4. No more “use it or lose it”: Under the new personal finance law that took effect last year, a gift card’s funds can no longer expire prior to five years passing since it was issued or funds were last loaded on it.
5. There’s value in buying gift cards with rewards: Most credit cards allow you to redeem your rewards for gift cards from a wide variety of major retailers. In many cases, you can garner more value from this type of redemption strategy than redeeming for cash. For example, under Citibank’s rewards program, you need 8,000 ThankYou points to get $50 in cash back, whereas you only need 5,000 points (37% fewer) for a $50 gift card.
6. Fees are avoidable: There are two types of gift card fees to be on the lookout for: shipping charges and service charges (e.g. purchase fee, inactivity fee, monthly fee, etc). Roughly 30% of gift cards from major retailers charge for shipping, according to Card Hub data, but these fees can be avoided by utilizing a gift card search tool to identify the retailers that offer free shipping and/or digital gift cards, which can be sent directly to someone’s inbox. In addition, the best way to avoid service charges is to opt for a store-issued card, rather than a general-purpose gift card (e.g. Visa gift card, American Express Gift Card). General-purpose gift cards have fees because they’re the only source of revenue for issuers. Store-issued gift cards, on the other hand, do not need to charge any fees, since the retailer books a profit the moment you buy its gift card.
7. Be wary of overspending with gift cards: When redeeming gift cards, two-thirds of consumers spend more than their cards’ face value, according to Consumer Reports. This is likely due to the same psychological factor that leads consumers to spend more with credit cards than cash: the money somehow seems less real. While gift cards can be quite useful in subsidizing the cost of large purchases, you should be especially cognizant of your spending when using a gift card, so as to avoid unnecessary expenses.
8. Expect clearer disclosures: This is the first holiday season where gift card issuers are required to include disclosures about expiration dates and fees on their gift cards. Make sure to read the disclosure on any gift card you receive in order to use it properly and avoid issues.
Ultimately, as long as you keep the aforementioned 8 gift card factoids in mind, the holiday season will be a whole lot happier, both in terms of you bank account and the smiles you illicit from the recipients of your gifts!
