Latest responses to “Buying A Gift Card Is Like Giving The Issuing Company A Free Loan” Copyright 2013, MoneyBlueBook.com 407180 2009-07-18T21:46:33-07:00 Nick Most of this analogy does make sense and anyone who understands the time value of money would agree with you; however, your arguments has several major flaws. 1. The average amount of a gift card purchase is almost always too small and the length of time between purchase and redemption too short for "interest" to play any mitigating factor. 2. When you buy a gift card it goes on the company's financial statements as a liability; which, depending on the company can be a good or bad thing, but most often I'd assume a bad thing. AND MOST IMPORTANTLY, 3. The company cannot redeem unused gift cards for their value. It is illegal as this would count as unearned revenue. So, if a consumer were to forget to use their gift card until it expired, the remaining balance would be paid to the state or town or city in which the card was bought. Also, why would one run out and make an immediate purchase. I doubt most people are like, "sweet, I just got this gift card but I really want to mitigate the effects of the time value of money so I'll just spend it immediately without serious thought into my purchase. I do AGREE with you about the unsecured part, but it's a rare circumstance where gift card companies default on their gift card obligation. Also, I agree that gift card presents are not very different from cash other than psychological factors. Also, prices on old products go down. So, if you think of this example. You receive a $50 gift card to XYZ company and the company is currently selling its top of the line ABC product for $49.99. If you were to wait 10 months or longer, the price may have dropped to $39.99 or even lower depending on product life cycle and type of industry. So if you think of it in that sense, you're never gonna be able to make that up in interest. I understand this example stretches, but still it works. 407170 2008-03-04T12:28:54-08:00 Lily I never thought about it like that (interest-free loan), but that's a great analogy. Personally, I either buy a thoughtful gift or I give money (which is really a gift of cash + freedom). Too much small print with gift cards!