5 On Your Side

When a Gift Card Isn't a Gift

Gift cards become popular around the holiday season. But a big consumer group warns that shoppers might need to re-think buying gift cards.

Posted Updated

A recent survey shows how popular gift cars are: Six out of 10 shoppers said they plan to buy one this holiday season. But Consumer Reports warns that unredeemed gift cards are easy money for retailers and lost money for consumers.

Gift card buyers will likely put $35 billion into retailers' cash registers this holiday season. Gift cards are easy to buy; they're online, in drug and grocery stores, as well as in retail stores and shopping malls. Even banks offer gift cards.

Consumer Reports, however, is so concerned about the pitfalls of gift cards that the group paid for a full-page ad in Tuesday's New York Times. The ad warns that gift cards often do not end up as gifts, going unused and wasting buyers' money.

Their recent survey backs up that warning: More than 25 percent of those who received gifts cards a year ago still have not used at least one of them. Consumers listed their biggest reasons for not using them: no time to shop, not finding what they wanted at stores, and simply forgetting about the cards.

"This year, approximately $8 billion in gift cards will never be used," Amanda Walker with Consumer Reports said.

"They may be lost, or they may expire before they're cashed. But ultimately, it's money in the bank for the businesses that issue them."

If you are certain that someone on your list will use a gift card, your next move is to shop carefully. Many cards have expiration dates and added fees, particularly bank-issued cards.

"Take the I-Card Gift Card. A $25 maintenance fee is automatically deducted after six months and again every six months thereafter," Walker said.

Some bank-issued cards, including some from American Express and Visa, carry purchase fees of anywhere from $2 to $10.

Walker added another warning: "You can't assume bank-issued gift cards are universally accepted, as the issuers will often have you believe."

Another consideration is whether the gift card can be replaced if it is lost or stolen. Some cards cannot be, while proof of purchase must be provided for others. Also read the fine print to see if the card has an expiration date.

If you do buy a gift card this holiday season, check the terms and conditions, so your gift card does not become a worthless piece of plastic. Or, just cash – it never expires, and you can spend it anywhere.