Gift cards require some thought, too
Buying a gift card lets you off the hook if you’ve got persnickety people to shop for.
Or, if you lack time, ideas, good taste, or the will to hit the malls or stores.
But let’s talk about those ubiquitous little plastic presents. If you don’t buy a good one, they could wind up as a gift to retailers or a state treasury, and not the one on your shopping list.
I’ll explain later. First, here’s what you need to know:
Your gift recipient may never use the card.
TowerGroup, a research consulting group based in Needham, Mass., “anticipates total gift-card volume to grow from $83 billion in 2006 to $97 billion by this year’s end in stored value,” said Brian Riley, its senior research analyst for bank cards.
The National Retail Federation, the nation’s largest retail trade group, expects consumers to spend about $26.3 billion on gift cards this holiday season alone.
But Consumers Union in New York, publisher of Consumer Reports, reported that an estimated $8 billion in gift cards went unredeemed last year.
It said 27 percent of 1,000 people that it surveyed last month still have a gift card from last year. They haven’t had time to use the card, haven’t found anything they want to buy, forgot it, lost it or let it expire.
So think twice about giving a gift card.
Some gift cards are riddled with fees.
Consumers Union found issuers that charge $15 to replace a lost or stolen card; $15 to redeem a card for cash; a $25 semiannual maintenance fee; a $2.50 monthly service fee; $15 to use the card after it expires; 35 cents on every purchase; $2.50 to use the card at an ATM machine.
One issuer charges $3.95 plus shipping and handling just to purchase a card, while others cost nothing.
Some charge when you don’t use the card, or you ask for a paper statement.
Some cards expire. Others don’t. Some can be extended for a fee.
Some can be used online. Others can’t, or they can’t be used in a lot of places. Some are reloadable. Others aren’t.
Terms, fees and restrictions vary. Read the fine print carefully and total the cost.
For a bigger picture on nuisance fees, other gotchas and more tips, go to http://www.consumersunion.org or http://www.nrf.com.
“If you get them, understand that they shrink, particularly if they have a bank logo on them,” said Ed Mierzwinski, consumer-program director at the Public Interest Research Group.
Watch those bank gift cards.
They can be used at more retailers than store cards can, but they’re often loaded with fees and restrictions, Consumers Union warned.
Have compassion for your recipient.
Find out if the amount you’re loading onto the card is enough to afford something in that store.
Pass along the gift-card receipt to the recipient. If it gets lost, stolen or damaged, the person may need the receipt, Consumers Union said.
Also, don’t saddle your gift recipient with a card riddled with fees, urged Bill Hardekopf of Lowcards.com.
Tips for recipients.
Register the card with the issuer. Use it quickly before it expires or to avoid monthly maintenance fees. Hang on to it afterward in case you have to return something.
What happens to the $8 billion in unredeemed gift cards?
Initially, that money sits on the books of the issuers as a liability, an IRS official said. Retailers are unable to count gift card sales until after they are redeemed.
After about two years, though, that money is a keeper. It converts to income. Unless, that is, the issuer is in a state that sweeps unclaimed money into its treasury and tries to find the recipients. Virginia isn’t one of them.
But that’s how gift cards could wind up benefiting retailers or a state treasury, not gift recipients, if they don’t use them.
So give a gift card if you wish, but not until after you know all the fees and restrictions. Tell them to the recipient.
By Iris Taylor
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