Gift cards are THE hot holiday present this year.
According to a Fox News report, one in five holiday shoppers will purchase gift cards — those plastic cards that come in varying denominations. Consumers will spend $17 Billion (USD) on gift cards this holiday season alone. Over 17% of holiday sales will come from gift cards.
Gift cards have become so hot that some retailers are actually selling gift cards of other retailers.
But watch out. Retailers love gift cards for a reason. Several reasons actually.
First, about 20% of gift cards are never redeemed. That 20% ends up as free money in the retailer's pocket. So if you receive a gift card, make sure you are among that 80% that actually "spend" the card.
Second, many of the cards have expiration dates. Some cards expire after one year — or even six months. Use it or lose it!
Third, others charge a monthly dormancy fee after a certain period of time that can draw down the balance to zero very quickly. For instance, Barnes & Noble had been charging a $1.50/month fee after one year. However, under pressure from consumers it recently discontinued the practice. But many other retailers still charge the fees.
Fourth, retailers frequently get an "uplift" from gift cards. That means that a consumer with a $25 gift certificate is likely to spend more than $25, paying money in addition to redeeming the card. And we all know what that means. It means you are making an impulse purchase, probably for something you don't really need. You're buying it because you have the card, and you figure what the heck, it's not costing me $40, it's only costing $15 because I am using a $25 gift card.
Despite the downsides, though, a gift card can be an ideal and welcome gift for many people. There is still time to order one online at Amazon (see below).
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Article comments
1 - Brad
Aside from a few accounting reasons from the business' perspective, I don't see how it's ethical to attach an expiration date to a gift card, and consider it revenue when that date passes. If you've paid for buying power at the store, you should own that buying power until you use it.