Gift cards are great, watch out for sneaky tricks

By for CAES News

By Cat Holmes
University of Georgia

Finding the right gift for certain folks can be tricky: How do you know which books Aunt Sue has already read? For many, a gift card seems the perfect solution to these dilemmas.

While gift cards have become an increasingly popular gift choice for the holidays, University of Georgia consumer economics specialist Michael Rupured warns of some "sneaky little practices" some companies employ.

Retailers like stored-value gift cards because they're easier and cheaper to handle and harder to counterfeit.

Shoppers seem to like them, too. Gift card sales are expected to increase by as much as 15 percent this year to nearly $45 billion. Whether you're giving or getting gift cards, be sure you understand how they work.

There are pros and cons to gift cards. Consumers need to be aware of these to make informed decisions, Rupured said.

Gift cards, or "stored-value cards," as Rupured says they are properly called, look like credit cards, with a magnetized strip on the back that stores information on how much the card is worth.

Some cards can be used at the store of purchase, others at certain malls or shopping centers. Still others can be used anywhere major credit cards are accepted.

"They're certainly a very convenient concept," Rupured said. "Who remembered to carry around paper gift certificates?"

However, Rupured notes that when a paper gift certificate was cashed, any remaining credit was returned to the gift certificate holder in cash. With gift cards, the unspent remainder stays on the card until it's used up, so all of the money goes to the retailer.

Watch for delayed fees. Some issuers begin charging fees ($1 to $2.50) after a specified time period if the card hasn't been used or used up. These fees may kick in as early as six months from the date of purchase and can quickly eat up the value, particularly for low-value ($5-$25) cards.

Consider the cost. Gift cards from major retailers are usually free. Gift cards that can be used at multiple retailers sometimes come with a small fee. You may be charged to check your balance, so be sure to keep track of how much you spend. Don't lose the card. If a gift card is lost or stolen, you may not be able to replace it. Some retailers charge a replacement fee, provided you have proof of purchase (such as a sales receipt) and the card's ID number.

Use the card. About 10 percent of gift cards are never redeemed. That's a gift to retailers of more than $4 billion that you probably didn't want to give.

(Cat Holmes is a news editor with the University of Georgia College of Agricultural and Environmental Sciences.)

Cat Holmes was a science writer with the University of Georgia College of Agricultural and Environmental Sciences.