We're living in gift card nation!

How big is the gift card industry?

In 2012 alone gift cards reached $28.79 billion in sales, and they are expected to increase dramatically every year thanks to new consumer shopping habits of shopping online, with digital commerce, etc.  They are so popular that approximately two-thirds of U.S. consumers have purchased at least one gift card.

What’s the average gift card value?

When gift cards are offered in increments, the most common purchased amount is $25.  The average dollar amount for gift cards is $43.75.  By the way, on average, men spend $30 more on gift cards than women, about $172 to $142.

Gift cards during the holidays.

One out of every four gift cards purchased is during December 21 and December 24!  Birthdays are actually the most popular occasion for a gift card, followed by Christmas and then Mother’s Day.  As of 2011, gift cards accounted for 18% of all holiday purchases! 

Why do retailers love them?

To put it bluntly, retailers do stellar business with gift cards.  That’s because the average consumer purchase is 25% higher with gift cards than if they paid any other way.  They also visit the store/site with 25% more frequency if they have a gift card.  Consumer spending is 6% higher when the company offers a loyalty card program.  In fact, research shows that gift card displays are the most profitable area of selling space in stores.  Retailers can also use gift cards to track consumer behavior and marketing research.  But the biggest reason gift cards benefit retailers are the economics of unused cards…

How many gift cards are left unused or partially used?

Incredibly, it’s estimated that each U.S. household contains about $300 of unused gift cards!  40% of people who receive gift cards do not spend the total value of the card.  That’s a huge number!  If you add it all up, between 2005 and 2011, more than $41 billion in gift cards went unused!

How about overspending?

61% of those who have gift cards spend more than the value of the card. The average person who shops with a gift card spends at least 20% more than the value of their card.  55% of consumers take more than one trip to the store or one search on the store online to spend their card.  Add that all up and you’ll see that gift cards are a huge cash cow for retailers.

How about digital cards?

These days, even printed plastic cards are behind the tech curve, as digitally generated and transmitted gift cards are the new wave – even easier to send and spend.  It’s as simple as going on a retailer’s site (like Amazon.com) and entering your payment information and the recipient’s email address.  Believe it or not, those who purchase digital gift cards spend even more – about 10-15% more than on their plastic counterparts.  By 2015, 61% of retailers surveyed plan on going digital with their gift cards.  The future will reveal even more innovation with QR coins and other incentive-based shopping loyalty programs.

Can gift cards expire?

New regulations (we’ll go over this in a bit,) mandate that gift cards must remain valid for 5 years, and any money added to the card later on is good for 5 years from that date.

What about gift card service fees?

AS if gift cards didn’t make retailers enough profit, you can still be charged a fee to purchase the card.  Now, all fees must be clearly disclosed on the packaging at the point of purchase.  New regulations limit the amount of service fees.  For instance, you can only be charged an “inactivity fee,” if you haven’t used it for a year, and you can only be charged one fee per month. 

What do the new regulations say about gift cards?

In order to protect consumers, Federal Regulations govern rules on gift cards sold on or after August 22, 2010.  These cover store cards and general use gift cards (like Visa, Discover, etc.) but not other prepaid debit cards, savings cards, or cards that are part of promotions.  Research shows these regulations have worked – the amount of unused cards now is only 1% of sales, while it used to be as high as 6.4% before 2010.

Can you redeem a gift card for cash?

This is a tricky area, with state and federal laws often conflicting.  In all practicality, the answer depends on the policy of the card issuer.  Some retailers allow gift card redemption for cash or at least a combination of cash and merchandise.  Federal Regulations starting in 2008 mandate that any gift certificate with a balance under $10 is redeemable for cash, which aims to protect consumers from overspending or retailers making “phantom profits” on unused remaining portions of cards.

What happens if your gift card is lost or stolen?

Unless you’ve registered the card or have the receipt, you’re out of luck.  That’s why you should always save the receipt and go through the registration/activation procedure (usually online) once you buy or receive a gift card.  If you’ve done that, most retailers have a protocol to replace your card.

What if the retailer goes bankrupt before you use their gift card?

Bankruptcy protection will most likely render the gift card worthless, so spend it quickly with shaky or smaller retailers.  However, in the event of BK, you can ask the retailer’s competitors if they’ll honor the card, or use it at another store under the same corporate umbrella.

Where is the best place to purchase gift cards?

 Most gift cards are sold at the point of purchase in stores, but often these come with extra activation fees.  Buying cards or digital cards on the retailers website is a great idea as long as you read the fine print on their fees.  A huge secondary gift card selling market has emerged, with people selling them on EBay or card exchange sites like PlasticJungle.com, Cardpool.com, or GiftCardGranny.com.  You often can purchase them for 75-80% of the card’s value (or sell unwanted cards for the same,) but be careful – it’s easier to get swindled with counterfeit or expired cards, etc.  Also, the most popular brands will sell quicker and at less of a discount.

But my research reveals that the best place to buy gift cards is probably big discount warehouse clubs like Costco and Sam’s Club.  They routinely offer them at less than face value of the card, some times up to 20% off if you buy a card for $100 or more.  They’ll have plenty of big brands like iTunes, restaurants, and popular national retail chains.  They have fantastic customer service if you ever have an issue.