alternative gifts / gift cards

Why I’m not a fan of gift cards

 OK. It’s too late to reverse the flood of gift cards given in lieu of more sensible gifts for this Christmas.  On Wednesday, December 23 Suzanne Kapner, writing for The Wall Street Journal, reported on the huge increase in gift card purchases this season. 

“Gift-card purchases in the first week of December were twice the rate in the same period last year, according to InMarket, a data-analytics company. Gift card sales jumped 48% last weekend, compared with earlier in the week, as deadlines for free shipping with guaranteed Christmas delivery expired, according to Rise.ai, which manages electronic gift card programs for more than 5,000 brands, including Allbirds and Milk Bar.”

Shoppers wanted to avoid crowded stores during the pandemic and the massive overload shouldered by the USPS, Fed-Ex and UPS that delayed deliveries.Ok, I get it but… somethings to think about the next time you are tempted to buy a gift card (clearly marked with a dollar amount): 

“The gift-card boom might not help holiday sales. Retailers can’t record the revenue until the cards are redeemed, according to Nathan Ehrlich, chairman of the Retail Gift Card Association.”

Kapner explains: “There are two types of gift cards. So-called closed-loop cards are issued by banks and branded merchants including Macy’s or Amazon. They typically have no fees and don’t expire but can only be used at the retailer with its brand on the card…”

So “closed-loop” cards limit where the recipient can redeem the gift. 

“Open-loop cards operate on card networks such as those run by Mastercard Inc. and Visa Inc. These cards can be used anywhere those brands are accepted but typically hit recipients with fees.” “If you don’t use the money, the fees will eat away at the balance.”

“A sizable portion of gift cards go unused, allowing merchants and card issuers to later book some of those funds as revenue under accounting rules. Mercator estimates merchants keep roughly $3.5 billion of unredeemed balances annually.” That’s BILLION with a B! So your money spent on gifts cards may just line the pocket of the retailer. 

Here’s a better idea: Give old fashioned, never-go-out-of-style CASH! I doubt any of that gift will go unused. Consider that during this pandemic many people have lost income, jobs, and may be at risk of becoming homeless. Well… that’s not MY relatives and friends. Don’t be too sure! 

Especially for children, giving cash can help teach them to save some, donate to charity, and spend the rest on what they really want/need for themselves. 

Recently when I thought the $600 payments to all Americans (and their children) were assured (before Trump’s threatened veto), I asked a teenage friend what she planned to do with her $600. She didn’t miss a beat: “Give half to Planned Parenthood and put the other half in my college fund,” was the prompt response!

Source: Financial Planning for Women