Four Reasons Why Gift Cards Are A Bad Idea

by James & Miel on March 25, 2010 · 10 comments


Hello Folks,

When it comes to gift cards, forget the card: give cash.

There are a ton of reasons why you should give cash instead of cards. Here are four:

1) People Don’t Use Them: According to a 2008 consumer reports survey, nearly 1 in 4 Americans didn’t use their gift cards. This is up from 2006 when only 19% of people didn’t use their cards.

2) Fees & Restrictions: Some cards contain high levels of fees and restrictions. This is especially true for bank-issued cards, which often saddle recipients with fees, expiration dates, and other gotchas. Retail cards generally aren’t as troublesome but some of them lose value or expire if you don’t use them quickly, depending on laws and regulations in your state.

3) Poor Resale Value: Lets say that you have a gift card, but you don’t need stuff, instead you need cash. Well, in order to really quickly convert your card to cash you’ll have discount its face value by 40 to 50%. So basically, the cards don’t have good resale value especially when you need a quick sale.

4) Ownership Issues: Its not often clear who owns gift cards, which can be problematic if a legal dispute arises. Part of the problem is that the person who buys the card is not the person who ends up using it, raising questions about who “owns” the card and has legal standing to challenge the issuers’ regulations.

Credit card companies who issue gift cards are regulated by banking authorities and generally follow the rules that govern electronic funds transfer, but it’s not clear whether those rules can properly be applied to the gift cards. In short, its not clear who owns the cards from a legal standpoint and its also murky as to who is responsible for regulating gift cards. In either cases, if you have a dispute, you could be at a disadvantage.

On the other hand, cash is almost always appreciated. Also, there are no restrictions, you have 100% resale value and nobody will sue you for paying with cash. So the next time you are thinking about getting a gift for someone, get them cash.

Best,

James



{ 10 comments… read them below or add one }

1 Blair MacGregor March 25, 2010 at 11:50 am

Hi James –

It's funny because all of this makes sense; I think it's just a social stigma that it's somehow "improper" to give cash as gifts to people. I'm guilty of it myself and have gone the gift card route for other people; even though I say to those same people when my birthday, holiday, whatever that they can give me cash! It's pretty funny. Guess it's just something I should work out of my system.

-B

2 Kim March 25, 2010 at 1:14 pm

However, for the purchaser (gift-giver) it is better to give gift cards over cash, as you have some sort of "control" over what the purchaser uses it for, as well as the almighty points that some credit cards offer. I have to admit, that is one good reason why I would much rather give gift cards.

3 Anonymous March 25, 2010 at 1:54 pm

Gift-giving culture has already gotten tacky, excessive, rude and entitlement-laden in America. Even with the downsides of gift cards, I'm not going to make it worse by giving cash. I'll stick with gift cards, which are at least slightly more personal and less awkward than a cash transaction with a friend or family member. Besides, many of the issues listed in this posting have been addressed or are irrelevant. For example, many states have outlawed expiration dates and crazy fees. And the legal ownership thing is a crazy concern unless someone feels the need to buy a gift card worth thousands of dollars.

4 Dual Income No Kids March 25, 2010 at 2:45 pm

Kim,

Good point. But that said, gifts really shouldn't be about control should then?

5 Dual Income No Kids March 25, 2010 at 4:16 pm

I personally don't like gift cards for another couple of reasons.

They are something on my to do list. They also then put some pressure just to use it and get rid of it, just to take it off the list. However, since I'm a minimalist, I won't buy something until I need it, and thus don't spend them. I still have several cards from our wedding nearly four years ago, and since I need nothing for our kitchen, who knows when I'll eventually spend them.

I actually got a gift card for a chain restaurant that is not in DC, that I've still never been to, and finally gave it to my niece after four years because there was a restaurant in her area. Still, this gift lingered for four years of my contemplating when I'd ever use it. I have better things to do than that.

Right now I have no less than about five cards, though several are from returns, but still.

Miel

6 Dual Income No Kids March 25, 2010 at 4:27 pm

A few more comments on the subject of gift giving part of it.

I think that if anything gift cards are the opitomy of tacky. To me, gifts should be personal. If you gave me a gift card or certificate a local place in my neighborhood I'd be thrilled and touched, however when you get one that you know isn't even in the city I live, it doesn't show as much care into the gift giving.

I really on give cash at graduations and weddings, as these are times when I was grateful for the generosity of others. But I've never bought a gift card, though I have bought gift certicates.

Any gifts that are given should be thoughtful, which gift cards are often not known for being.

Miel

7 Anonymous March 25, 2010 at 9:04 pm

epitome

8 Dual Income No Kids March 26, 2010 at 8:49 am

That's what you get for commenting from a blackberry!

9 Tara March 29, 2010 at 9:55 am

I have always hated gift cards–both giving and receiving them. It seems that I always receive gift cards to stores I never shop at, and even if I do use them, they are often greatly reduced in value by the time I remember I have them. I have started keeping a running wishlist going on myregistry.com to give people other ideas and I even made a cash fund on it in case anyone is still tempted to go that route.

10 Kass December 19, 2014 at 9:42 pm

If someone is just buying me a gift card because it helps them to get “points” on their credit card, that just nauseates me to no end. I am going to start refusing gift cards.

Leave a Comment

Spam Protection by WP-SpamFree

Previous post:

Next post: