Top 10 tips for buying gift cards for the holidays

Thirty percent of consumers say they want to give gift cards this holiday season.

But not all gift cards deliver. Nearly $1 billion in gift cards purchased went unused in 2015, despite gift cards being among the most popular gift.

To help gift card shoppers, WalletHub, a personal finance website, offers these top 10 tips for buying gift cards:

1. Look for a discount. The best gift cards can be bought for less than face value. You can learn where to look for deals from a WalletHub article on the best gift card exchanges.

2. Avoid card-network gift cards. Gift cards from Visa, Mastercard, and Discover might seem like they’re as good as cash, since they can be used anywhere, but they’re actually inferior. While retailers make money immediately when one of their gift cards gets purchased, these card-network gift cards make money from fees. So if you want the versatility of cash, use cash instead. It will be cheaper. That’s why no card-network gift cards were included in WalletHub’s list of the year’s best gift cards.

3. Don’t confuse gift cards and prepaid cards. Despite often being displayed next to each other in stores, gift cards and prepaid cards are different. Gift cards are used only until the original balance is gone. Prepaid cards are reloadable and serve the same purpose as a checking account with a debit card. Prepaid cards also have fees. So giving one instead of a gift card could result in the recipient not getting as much value as you intended. The average prepaid card has nine separate fees, according to WalletHub’s latest “Prepaid Card Report,” and the wrong prepaid card could cost an individual up to $311 per year if used incorrectly.

4. Beware loyalty cards. A loophole in the law allows non-reloadable prepaid cards, which are gift cards, that are received through a loyalty, award, or promotional program to expire with no restriction. Normal gift cards can’t expire until five years from the date of issuance. So it’s important to find out that you’re buying/receiving actual gift cards and to read the fine print.

5. Resale is always an option. If you don’t use a gift card or the recipient doesn’t like it, you can sell it on a gift card exchange or trade it with a friend or family member. To learn more about these options, check out WalletHub’s picks for the year’s best gift card exchanges.

6. When in doubt, give cash. Cash may seem less personal than a gift card, but it eliminates guesswork and is the most versatile gift you can give. In addition, you may be able to give your recipient more value without shipping fees or shopping trips taking some of the value.

7. Tap into unredeemed value. Do you have any gift cards that haven’t been redeemed in recent years? Check your drawers. Any gift card from the past five years is most likely still good. You can sell unwanted gift cards for cash, trade in old, unused gift cards for new ones, or recoup unused funds from expired gift cards under unclaimed property laws.

8. Buy gift cards with rewards. Most credit card rewards programs allow you to redeem your points/miles for gift cards from many major retailers. In many cases, you can get more value from this type of redemption strategy than redeeming for cash.

9. E-gift cards are great in a time crunch. Time-crunched shoppers can avoid the shipping fees that many major retailers charge for physical gift cards ordered online.

10. Avoid using gift cards as an excuse to overspend. When redeeming gift cards, two-thirds of consumers spend more than their cards’ face value, according to Consumer Reports. This is likely due to the same psychological factor that leads consumers to spend more with credit cards than cash: the money somehow seems less real. While gift cards can be quite useful in subsidizing the cost of large purchases, you should be especially cognizant of your spending when using a gift card to avoid unnecessary expenses.

My next article is on what are the best gift cards.

Copyright 2018, Rita R. Robison, Consumer Specialist