Four Reasons Why Gift Cards Are A Bad Idea

by James & Miel on March 25, 2010 · 9 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



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