Consumers Going Back to Gift Cards

Consumers Going Back to Gift Cards

More than 80 percent of shoppers surveyed by the National Retail Federation (NRF) plan to buy at least one gift card during the holiday season. The group estimates that total spending on cards in November and December will reach $29.8 billion, up $1 billion from 2012. The NRF also estimates the average gift card amount will increase by 4 percent to $163.

In 2010, gift certificates, store gift cards and general-use prepaid cards began coming with some protection with restrictions on fees and expiration dates, thanks to the Credit Card Accountability, Responsibility and Disclosure Act of 2009. While the Credit CARD Act made gift cards more user friendly, the cards still carry the risk of being forgotten and not used during the first year or the issuer going out of business. For that reason, recipients should use the cards as soon as possible. More than $1 billion on gift cards still goes unredeemed annually, according to research from CEB TowerGroup.

In most states, money loaded onto a gift card is good for at least five years from the date the card was purchased, with any funds added to a gift card later also good for at least five years. Fees can be charged if you haven’t used your card for at least one year, but restrictions apply to maintenance fees, inactivity fees for not using your card, usage fees or fees for adding money to your card.

To make sure you get the most for your money when purchasing a gift card, avoid gift cards that come with purchase fees or activations, such as general-use prepaid cards. Look for specials to pay below face value for your gift cards. Many restaurants offer specials such as buy $100 in gift cards, get another $25 gift card for free.  Also, when using or gifting a card for use at businesses where gratuities are expected, such as restaurants or salons, be aware of something called “tip tolerance.” Some businesses try to leave 20 percent of the card’s value available for a tip, which can make your card not appear to have its full value. Gas stations, too, may pre-authorize $50-$75 when used at the pump, meaning if your card has a value less than that it may not work. It is best to “pre-pay” inside with the card for the exact amount, just to be certain.

Gift cards can be a great option when your loved one prefers cash or is difficult to buy for. They can also help the giver stick to a holiday gift budget. After all, any savings and investment plan depends on your commitment to a spending plan. Call your financial advisor if you’d like to review your financial goals.

FINANCIAL FACTS

Improvement – As of Sept. 30, 2013, one out of every 10.3 home mortgages (9.8 percent) in the U.S. is either delinquent or is in the foreclosure process. As of Dec. 31, 2009, one out of every 6.7 home mortgages (15 percent) in the U.S. was either delinquent or was in the foreclosure process (source: Mortgage Bankers Association, BTN Research).    

A Real Number – The nation’s unemployment rate was 7.3 percent as of Oct. 31, 2013. Every half of 1 percent decrease in our nation’s unemployment rate is equal to 774,000 Americans going back to work (source: Department of Labor, BTN Research). 

What A Year – Eighty-eight of the 500 individual stocks in the S&P 500 (i.e., 18 percent of the 500 stocks in the index) have increased in value at least 50 percent YTD through the close of trading last Friday, Nov. 22, 2013 (source: BTN Research).