Gift Card Gifting Dangers to Avoid

As posted on November 25, 2014 on www.usnews.com

By Kimberly Palmer

Gift cards are poised to be one of the most popular gifts this year, thanks in part to innovations in the gift card market, like added security and ease of use. The National Retail Federation’s annual Gift Card Spending Survey found that the average shopper will spend $172.74 on gift cards this year, an increase from $163.16 last year. The average card is worth almost $50, and popular card retailers include coffee shops, electronic stores, restaurants and department stores.

While in the past gift cards might have been considered an impersonal gift, that is no longer the case, the NRF reports. In fact, gift cards have been the top-requested item from recipients the past eight years, which means shoppers don’t have to worry about whether their gift card will be well-received.

There are, however, a few things that savvy shoppers should know about this year’s crop of gift cards before making any final purchases. Here are six factors to consider before selecting your card:

1. Check up on the fees charged. Not all gift cards are created equal. While the 2009 CARD Act limits inactivity fees and expiration dates on cards, an October survey of 62 gift cards by Bankrate.com found that general purpose gift cards generally charge purchase fees ranging from $3.95 to $6.95. In contrast, only 7 percent of store gift cards charge purchase fees. That means buying a gift card at Gap or Barnes & Noble, for example, can be a better deal than buying a general Visa-branded gift card.

You’ll also want to check on any monthly maintenance fees that are charged if the card isn’t used after one year. Bank and credit card-issued gift cards are the most likely to charge this type of fee, while store-specific cards generally do not. (Of course, the bank and credit card-issued cards are also more flexible, since recipients can spend them almost anywhere and aren’t limited to one specific store.)

2. Use them or lose them. Even the most consumer-friendly rules can’t protect shoppers from their own forgetfulness. If a gift card stays tucked away in a drawer forever, it’s not doing anyone any good. Although most cards don’t expire, a few do after five years, and there’s always the chance the retailer will go out of business.

3. Take advantage of extra security perks. Gift cards are often more secure than simply giving cash, since some gift card issuers offer to replace cards if they are lost or stolen. For this perk to go into effect, recipients often have to register their cards in advance,so be sure to read the fine print that comes with the cards and take any necessary steps.

4. Know where your recipient likes to shop. Since store-branded cards tend to come with fewer fees than bank or credit card-branded ones, gift card givers can save money by purchasing store-specific cards, as long as they know the shopping habits of the person they are gifting. For example, Target gift cards work well for frugalistas and Amazon gift cards for online shopping lovers.

5. Read the fine print. Since card fees vary, purchasers and recipients should check out the specifics that come with each card. That way, you can avoid any fees and other unpleasant surprises.

6. Look out for mobile gift cards. The latest innovation in the gift card world, mobile gift cards, make it easy to upload cards to smartphones to make paying even more convenient. Starbucks is one of the leaders in this technology, and more retailers are getting on board, too. The Bankrate survey reports that 59 percent of gift cards are now available electronically, which is especially good news if you’re gifting cards to people who tend to lose things.

In fact, Bankrate found that millennials are more than twice as likely to lose physical gift cards than older generations. Four in 10 18-to-29-year-olds said they’ve lost a gift card, which means if you have 20-somethings on your shopping list, you might want to give them a card they can use electronically (and that’s protected in case they lose the physical card).

Another plus of using electronic cards, which can be accessed not just through mobile apps but also via email, is that they can be personalized, with tailored notes to your recipients.