Bank Deal: Earn 1.00% APY on an FDIC-insured savings account at Barclays Bank.
On the surface, gift cards seem like a perfect gift for those that have everything. After all, you’re giving the recipient the ability to choose their own gift, so they’ll definitely get something they want. Right? Well… Maybe.
As attractive as that sounds, a surprisingly large fraction of gift cards go unused, so you might want to think twice before handing them out at Christmas. Indeed, according to a recent survey by the Consumer Reports National Research Center:
“27 percent of those who received gift cards during the 2006 holiday season had not used one or more of them nearly a year later… up from the previous year, when 19 percent of consumers had one or more unused gift cards. Over one-third of those respondents said they didn’t use the cards because they either forgot about them, lost them, or the cards had expired. But the most common reasons people gave for not spending their gift cards were that they didn’t have time to shop (58 percent) or couldn’t find anything to buy (35 percent).”
Interesting. I would’ve expected a much higher fraction to get lost or be forgotten. But there’s a lesson here… As flexible as you think that gift card is, many recipients apparently don’t agree. Nonetheless, the projections are for over $100 billion in gift card sales in 2008. That’s right… One. Hundred. Billion. Dollars.
Store vs. bank cards
If I were a betting man, I’d wager that the reason such a large fraction of cards goes unspent is because they’re tied to a specific store. It’s far less convenient to use a card if you have to visit a particular store. This also plays into the inability of the recipient to find something that they want to buy. If they had the flexibility to use the card anywhere they wanted, they’d undoubtedly find something to spend it on.
So why not go with a bank-banked gift card? These cards give the recipient the freedom to shop at any store that accepts Visa or MasterCard. Sounds great, but the issuing bank typically charges an upfront fee when they sell the card. And that’s not necessarily the end of the fees… Both store-issued and bank-issued gift cards often have inactivity fees and expiration dates.
Why not cash?
I’m not sure how the gift card industry managed to pull this off, but somewhere along the line it became far more acceptable to give a gift card than to give cash. Why is this? Cash is far more flexible and just as valuable (moreso, in fact). Yet most people are reticent to give cash. Perhaps it’s a fear of looking lazy and/or thoughtless. But the bottom line is this… When I give a gift, I want it to be useful to the recipient.
Do you think less of someone if they give you cash instead of a gift card? I sure don’t.
- How to Become a Millionaire
- How to Get Out of Debt
- The Best Dollars I've Ever Spent
- How Our Estate Plan is Structured
- How We Paid Our Mortgage In Less than 10 Years
- Money Making Ideas
- How to Manage Your Asset Allocation with Multiple Accounts
- Consumption Smoothing - Save While the Saving's Good
- How to Save on Groceries
- How Much Life Insurance Do You Need?
- Eleven Great Books About Money
- Dave Ramsey is Bad at Math (693)
- Dish Network Customer Service SUCKS (536)
- $8,000 Homebuyer Tax Credit (429)
- Pay Off Mortgage Early or Invest? (424)
- How to Claim the First-Time Homebuyer Tax Credit (352)
- Termite Control: Sentricon vs. Termidor (329)
- How Much Should You Pay a Babysitter? (288)
- Ethanol Blended Gas = Lower Mileage? (272)
- Reduced Credit Limits? Share Your Experience (256)
- $15,000 Homebuyer Tax Credit (242)
- Buying Furniture off the Back of a Truck (237)
- Will Mac OS X Lion Kill Quicken 2007? (191)