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Retailers Clean Up On Holiday Gift Cards

Fast Gift Solutions for Us Mean Big Bucks for Retailers

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Retailers Profit On Gift Cards

Retailers Profit On Gift Cards

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Gift cards are a great solution to the hard-to-buy-for person or as gifts to give at work. There is no big shipping charge, no guessing at what the person wants, no wrong sizes to worry about and the recipient can use the card during the after-Christmas sales.

But according to the National Retail Federation, although an estimated $26.3 billion will be spent on gift cards, $8 billion or more will never be used. A Consumer Reports survey determined that 27 percent of the people questioned had gift cards from last year and 51 percent from that group had two or three.

Who Sells Gift Cards?

Gift cards can be purchased from almost anywhere these days. Even your local grocery store may have signs up, tempting you to buy a gift card for that hard-to-find person on your list. But the most popular gifts cards sold this time of the year can be narrowed to four:
  • Cards sold by major credit card companies such as American Express, Mastercard, Discovery and Visa.
  • Cards sold by most retail chains such as Home Depot, Bed Bath and Beyond and the Gap.
  • Cards sold by malls.
  • Cards sold by restaurants such as Chili's and Starbucks.

The Pros and Cons

There are pros and cons to giving almost any type of card mentioned above. The biggest advantage is that the person you give it to can shop on their own time and purchase what they want. The biggest drawback is that the card is left unused or gets lost.

Before You Buy a Gift Card...

1) Make certain it is from a store that the person who is receiving the card regularly shops. One of the top reasons people do not use gift cards is because they say they could not find anything to buy.

2) Avoid giving gift cards to people who are generally disorganized. A major reason gift cards are not used is because the cards get lost.

3) Consider cash as an alternative. This allows the person total freedom as to where to spend it.

4) Ask about extra fees and if the gift card loses its value over time.

Ask About Hidden Fees

The credit card gift card can be a wonderful gift because the recipient can usually use it anywhere the credit card is accepted. The biggest drawback however, is that unlike the retail and restaurant cards, credit card gift cards usually have fees associated with it such as processing and delivery fees ranging from $2.60 to over $6.00. Also, if the card is not redeemed before a specified time, a monthly fee may be charged.

Malls are also known to depreciate the face-value of a gift card which is not redeemed within a specific time. Finding out all the details and redemption deadlines can help determine if getting the card is a good idea or not.

The Gift Card Sellers Come Out On Top

Gift card sales for retailers and credit card companies are big business. Basically they receive payment in advance for products or services they may or may not ever have to deliver. For every dollar on a gift card that is not redeemed, the gift-card seller earns a profit. In 2006, Best Buy reported over $43 million in unused gift cards remained on its books from the two previous years.

Safety Measures

Gift cards can be a wonderful solution to gift-giving, however once the card is given, how and when it is spent is out of the hands of the giver. If the recipient never spends it there is really nothing that can be done. As a safety measure to avoid a gift card from never being redeemed because its been lost - keep a record of all information when the card was bought, such as the date, how it was paid for and the gift card number.

If you plan on sending gift cards purchased online, always make a follow-up call to the company where you purchased it to make certain it was delivered.

See Also: The Small Print On Return and Free Shipping Policies

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