Tips For Buying, Giving, and Using Discount Gift Cards
Published 12/1/08 (Modified 3/8/11)
As a stereotypical male, I seem innately handicapped when it comes to performing certain tasks - "confusing activities" that include shopping and picking out the right gifts for the right occasion. I'm sure there are some men out there who love to cruise the malls and spend hours window shopping to their hearts' content like most of the women I know, but I'm most definitely not one of them. I can engage in strenuous physical activities and participate in aggressive sports, but yet somehow, whenever I step foot in a retail department store, I quickly become fatigued. Somehow, I instantly become drained of all energy and stamina the moment I am faced with the grueling ordeal of mall shopping. Worst yet, I'm a terrible buyer when it comes to gifting - which is why gift cards and gift certificates are such a God send for people like me.
Despite all the negative impressions and opinions that some online commentators and emotionally sentimental pundits have regarding the negatives of giving gift cards as presents, I love having at my disposal the option of buying gift certificates and store vouchers as presents for people. While it's true that gift cards are not the most particularly thoughtful present to buy for someone you really love or care about, they are incredibly convenient and financially versatile gifts for many people. For frugal savers like myself, gift cards present the perfect compulsory incentive and forced opportunity to buy and treat oneself when we'd otherwise choose to save the money instead. If you gave a naturally frugal person a cash gift, he or she would most likely squirrel away the monetary gift in a high savings account, completely defeating the purpose of the gift reward. But by presenting the person a gift card instead, you liberate the recipient from having to make the frugal choice, treating the friend to a well deserved material recess instead - something he or she would otherwise be reluctant to decide for him or herself. It's the perfect gift for overly-frugal people.
Sentimentality and thoughtfulness aside for a moment, gift cards also help overcome the occasional embarrassment of secretly undesired gifts. In the past, I've had my share of bad gifts. While I always treasure the careful thought and loving goodwill put into selecting the gifts that I receive, sometimes, I am left secretly thinking to myself that I probably could have picked out a better digital camera model or a more appropriate colored tie for myself. More often than not, the gift usually winds up permanently sitting on top of a shelf or inside a drawer somewhere, never to see the light of day again, or until it's needed again because I need to show the original giver that I still had the gift and hadn't thrown it away or sold it on eBay. That is why I have always been a huge fan of receiving gift cards for certain stores and retailers that fit my natural purchasing niche - popular stores with staying power like Best Buy, Macy's, and Target. Generally, gift cards are incredibly easy to give and incredibly easy to use, and there are many circumstances when they make ideal gifts. Of course, as with all potentially good things, there are critics and detractors.
The Problem With Gift Cards And Why Many People Seem To Dislike Them
- Upfront Charges and Maintenance Fees - Despite their immense popularity, many consumers avoid buying gift cards and handing them out as presents because they are leery of having to pay upfront gift card activation charges or having to contend with the hassle of keeping track of inactivity fees that have the potential to take significant bites out of the gift card balance. The worst case scenario involves nightmarish gift card issuers that slap hefty charges just to activate a gift card so it can be used, along with stiff fees for periods of inactivity, as well as pricey balance debits for account maintenance reasons. The worst offenders tend to be credit card or bank issued gift cards from issuers like Bank of America or American Express. Compared to regular retail store issued gift cards, these bank issued cards tend to be more notorious for imposing extraneous charges for transactions like non-usage and account balance checking.
- Expiration Dates - One surprising aspect about gift cards that have historically turned many off from their use are the expiration dates that they used to levy. In states that allow gift card expiration dates, the gift card holder must use up the gift reward card within a certain amount of time or the card becomes useless. However today, many states have enacted various gift card consumer protection laws prohibiting expiration dates and unexpected fees on gift cards sold, at least for a certain extended period of time.
- Interest Free Loan To Retail Stores - If you think about it, the purchase and use of gift cards is actually pretty silly. After all, why spend cash to buy something with the same transactional value as cash, but with substantially less flexibility and greater restrictions? Furthermore, when you buy a prepaid gift card, what you are essentially doing is offering the gift card retailer what amounts to a free 0% interest gift card loan. Until the prepaid gift card is redeemed by the recipient and actually exchanged for merchandise, the retailer is basically earning interest off of the money previously paid by you. The retailer is under no obligation to pay the amount back in the form of retail merchandise until the gift card's affirmatively offered up for redemption.
- Danger Of Gift Card Bankruptcy - Most recently, the issue of major retailers going bankrupt or going out of business has become a major headache and concern for holders of gift cards (the same way airline bankruptcies have wrecked havoc with airline ticket holders). As a gift card holder, you are essentially an unsecured creditor and like shareholders, are near the bottom in terms of money recovery during bankruptcy proceedings. When you buy a gift card from a retailer or company that goes out of business or ultimately files for Chapter 7 or Chapter 11 bankruptcy, the gift card recipient usually ends up with a card that's worth less than the face value. While during a bankruptcy restructuring, a company may attempt to stay in business and continue to honor gift cards, some may not. In such a dire scenario, all gift cards would be rendered completely worthless. Obviously, the best way to minimize the chances of ever being caught in such bind is to always spend your gift cards quickly and not try to save them for a rainy day.
How To Buy Discount Gift Cards Online - And Tips For Using Gift Cards Smartly and Efficiently
- Choose Retail Store Gift Cards Over Bank Issued Gift Cards - It's important to know and understand the differences between gift card policies from banks and credit card issuers, and those issued by traditional store retailers. Gift cards and gift certificate rewards issued by banks and credit card issuers like Visa, Mastercard, and American Express tend to offer substantially more flexibility than retail store gift cards since the bank-issued gift cards can be used anywhere that credit cards are generally accepted. However, with the greater versatility comes higher fees, more upfront charges, and more annoying expiration date worries compared to the gift cards issued by traditional retailers. Unlike bank issued gift cards, the great majority of retail store issued gift cards do not impose expiration dates, and significantly fewer of them contain activation fees, or impose charges like inactivity fines or periodic transaction maintenance costs. Clearly, retail store gift cards offer much better financial value than bank issued gift cards despite their more restrictive terms.
- Read the Gift Card Terms and Conditions Carefully Before You Buy - As with all things in life, there are contractual fine print terms and conditions that must be carefully read and headed. Always understand the rules of your gift card purchase before you buy. While oftentimes the terms and conditions are rather self explanatory, gift card buyers need to pay special attention to the existence of any potential activation charges, hefty monthly inactivity fees, or annoying expiration dates. If you are not clear on something, ask the gift card issuer before you buy.
- Don't Hoard, Spend Your Gift Cards Quickly - Once a prepaid gift card has been purchased, it should be treated like cash and redeemed as soon as possible. Try not to leave the gift card hidden and forgotten inside a wallet or purse as is commonly the end result of many misplaced gift cards. The longer you delay, the more you expose yourself to possible gift card balance forfeiture possibilities in the event of unexpected retail bankruptcies or program cancellations. In a tough economic recession, you never know which company may struggle and suddenly stop honoring its outstanding gift cards or gift certificates.
- Be Extra Careful When Purchasing Discount Gift Cards Online - Because gift cards are so popular, there is a huge market for them on online auction sites like eBay where heavily discounted gift cards for places like Costco, iTunes, Home Depot, and Walmart, are often up for sale and exchange. If you are seeking the best discount gift card offers, buying them online is the best way to go as online auction sites tend to offer steeper discounts and rebates than traditional brick and mortar retailers. When seeking the best eBay deals and bidding on online gift card auctions, the higher the gift card denomination, the greater the potential discounted savings to be had (frequently 5-20% off). However, it's important to bear in mind that while online gift card shopping may reap higher savings, there is a greater potential risk of loss. Online scammers and fraudsters abound and counterfeit gift card sellers exist, even on reputable online sites such as eBay or Craigslist. Generally, for the risk adverse, the most reliable way to buy a gift card is to purchase them from reputable retailers or from the original retail store.
- Buy Gift Cards With Reward Credit Cards For Extra Savings - Certain reward credit cards offer up to 5% cash back rewards for purchases made at special category retailers like supermarkets, grocery stores, gas stations, drug stores, or restaurants. Particularly at certain high reward retailers like grocery stores, many sell gift cards good towards other popular retail and department stores with few activation fees or maintenance charges. By buying popular retail gift cards to places like Best Buy, Bed Bath and Beyond, or Macy's from merchants like grocery stores or restaurants using qualified reward credit cards, you can engage in a form of credit card arbitrage by buying a discount gift card for a up to 5% off the gift card's face value, and easily pocket the savings.
- Keep Your Gift Card Receipt, Or Give It To The Recipient - Always keep your gift card purchase receipt or give it to the intended gift card recipient to preserve all options in the event of gift card expiration, misplacement, or card theft. While some retailers will not replace lost or stolen gift cards for any reason, most are willing to accommodate provided you can offer up the original purchase receipt. If for whatever reason your gift card expires before you've had the chance to use it up in full or exhaust its value, you may also be able to contact the issuer with your receipt and potentially get a limited time extension (after paying a possible fee). If the option is available, you should register your prepaid gift card if recommended to do so as it will help protect your recovery rights in case your card gets stolen or lost.
- Personalize Your Gift Card Present With Thoughtful Accessories - Those who want to personalize their gift card presents have options these days. Many major retailers are offering up creative and customizable packaging options for gift cards. If you want to give your gift card present a more thoughtful touch, you may want to consider packaging the card with another small gift the recipient may like - for example: including simple jewelry accessories like earrings or necklaces with clothing apparel store gift cards.
- Consider Giving Cash Or Using Chinese Red Envelopes Instead - Because gift cards are essentially the exchange of cash for something that's supposed to function as cash, one possible alternative to giving gift cards as presents is to give out plain old cash instead. One creative way to exchange cash gifts is to present them in elegantly decorated Chinese Red Envelopes, known as "hong bao" in Mandarin Chinese. These red envelopes, stuffed with money bills, are commonly given by the Chinese as presents for special occasions like New Years and birthdays. While I don't think our society is quite there yet in terms of new approaches to cash gifting, it's still an interesting multi-cultural trailblazer route to consider.