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 sixth 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. While we’re expected to spend more on holiday shopping this year compared to last, times are still tight and fears about the forthcoming fiscal cliff abound. Card Hub therefore created the following list of 8 Things to Know about Gift Cards this Holiday Season (plus two bonus tidbits) in order to help people relieve some stress on their wallets:
- 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 and buy a big-ticket item that you wouldn’t be able to afford otherwise.
- Unused gift cards retain value: Each holiday season, roughly one-quarter of consumers have unused gift cards remaining from the year before, 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.
- Discounted gift cards are available: According to a Discover survey, 25-50% sales and free shipping top the list of holiday must-haves for consumers. Luckily, discounted gift cards are available via online gift card exchanges, enabling you to save as much as 30% on popular gift cards, which typically do not charge for shipping.
- 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 10,000 ThankYou points to get $50 in cash back, whereas you only need 5,000 points (50% fewer) for a $50 gift card.
- General-purpose gift cards are costly: The best way to avoid gift card 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 that’s the only way they can be profitable 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.
- It’s easy to overspend 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.
- Shipping costs rob value from your gifts: 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.
- Prepaid cards aren’t gift cards: While gift cards and prepaid cards may look the same and are often displayed together in stores, they are very different and it’s important that you know that up front, as prepaid cards are intended for ongoing use and therefore come with recurring fees and the need for the cardholder to verify their identity and provide a Social Security Number.
- No more “use it or lose it”: Under the CARD Act, 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.
- Women want gift cards: Despite the fact that 67% of affluent women want gift cards during the holidays, according to American Express, men overwhelmingly buy them clothes and jewelry. That just increases the likelihood that you’ll have to tag along on exchange missions during busy college football bowl season and NFL Sundays, so you might as well get it right the first time.
Ultimately, as long as you keep the aforementioned gift card factoids in mind, the holiday season will be a whole lot happier, both in terms of your bank account and the smiles you illicit from the recipients of your gifts!