Gift Card or Cash?
Posted by John Draper | Filed under Money Management, Smart Shopper
Gift cards have become incredibly popular. A whopping $1.2 billion in gift cards are sold every year. Since it is tacky to hand someone a twenty and say, “Buy yourself something nice,” a whole new culture of giving has sprung up around plastic that acts like a credit card (you can shop without touching any money) and looks like a credit card (kinda), but doesn’t wrack up debt. And it’s been a boon people who just don’t know what to buy as a gift because everyone already seems to have EVERYTHING!
Personally I don’t like gift cards. First, they’re bad for the environment. Second, they distance us from our money (yet again) so we put less thought into our purchases. Third, they’re hard to use. Redemption always seems like such a chore for the check-out person. And fourth, they’re a rip off!
I don’t think I need elaborate on my first point. They’re plastic. They’re often one-use. And they’re multiplying by the millions. And where do they all go when they’re redeemed?
If you have a $20 bill that you could spend on anything, you’re more likely to do a better job of shopping than if you have a $20 gift card that you can only spend in a particular retail environment. Yah, those soaps are nice, I guess, and I have a gift card, so I might as well. Hmmm.
I recently redeemed a bunch of shopping points for gift cards, and that’s opened my eyes to the monsters these little pieces of plastic really are. If you try to use more than one card (and this goes for coupons too) at a time, it’s like you’re committing some major shopping faux pax. The line gets longer as your cashier rolls her eyes at you, and you wonder, “Why am I doing this?” That may be one of the reasons why up to $180 million is lost from people failing to use their gift cards.
In 2006, Best Buy revealed that a boon of $43 million existed on the books from gift cards that would likely not be redeemed. Wow! That’s $43 million dollars in MONEY for NOTHING but a piece of plastic.
Now we come to my 4th point: what a rip-off they are. So, I go into a drugstore to use their gift card and I’m told they can only give up to $2 in change from the card. So while the card is “as good as money”, you can’t convert it back to money, not even in the form of change. You can keep a balance on the card. And up until recently, you had to use the card before it expired or you’d lose that balance. Retailers were even subtracting money from the amount on the card if the card sat dormant for a length of time. Really!
Happily, some provinces are bringing in legislation that says NO MORE EXPIRY DATES or other fees that erode the value of the card. But no legislation will protect you from a company that issues a gift card and then goes bust, leaving you holding the plastic. When U.S. retailer Sharper Image went into bankruptcy, it refused to accept it’s own gift cards.
U.S. credit card companies are getting into the gift card business in a big way. These cards can be used just about anywhere, but usually come with significant fees and restriction. Card issuers also give themselves the right to change the rules however they want, whenever they want. The terms and conditions for the American Express Gift Card indicates they don’t even have to give you notice of changes.
As far as I’m concerned, gift cards should go the way of the dinosaurs. If someone wants to give me a gift, I want some thought to go into it. If there’s not a lot of money available, I don’t care. I truly do believe it’s the thought that counts. So the only gift cards or coupons I’m willing to accept are those drawn with crayons or markers and liberally sprinkled with glitter!
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September 18, 2008 at 10:37 am
Hmm. Interesting points, Gail! Even gift certificates, those old dinosaurs, had their issues. I received a $20 gift certificate for a restaurant about 5 years ago and promptly lost it. A year after it expired, I found it in an old coat pocket. I’m now wondering if they will be kind and honour it anyway. The law wasn’t in effect then, but at the same time, it is downright immoral to take someone’s money and then not honour it! That’s $20 down the tube!
At the same time, right now I’m saving up for a new camera, so instead of asking for junk I don’t really need for my birthday and Christmas, I thought I would ask for gift cards to the store I’m going to buy my camera from (Wal-mart). It seems less tacky than saying, “I just want money this year” — people know I’m working towards a goal and they’re helping me reach it. On my boyfriend’s side of the family, they do draws to determine which couple is buying for which couple — at an outrageous $150 a couple! Instead of asking for $75 in crap (DVDs? clothes? I really don’t need more junk), I thought it would go to better use toward a major purchase. Is that tacky? It feels less risky now that gift cards don’t expire — and in this case, I can say I definitely will be using the cards.
September 18, 2008 at 10:40 am
Gift cards are a nice idea, but again, it’s never the same as a gift. I bet most people put the card somewhere and forget about it. Now that they can not expire, that might improve things when you find it. I think the only gift card/certificates I have been given have been for spas! They were paper!
We the card expired, the companies were that much more richer, the same when you forget to top up your pay as you go cellphone, you pay for you minutes, they are good for so long, and boom they are gone, but the company provided no service, but get a nice bonus. Go figure.
Forunately, I buy only 6 gifts for christmas. Kids are the easiest to buy for, parents, siblings, and friends. urgh. I usually do a theme present and try to stay between $25-$50.
September 18, 2008 at 10:58 am
Gift cards are a God-send for my wife and I. We are both hampered from going out to shop by disease and have family that we buy gifts for all around the world. With the cost of shipping a t-shirt to France being almost as much as the t-shirt is worth, a gift card is a great compromise. And with new rules about what can and cannot be shipped and the documentation required for out of country packages, again gift cards help out. The new rules re expiration are good, but like money given to me, I put it somewhere that I will be able to find it. They might not have the same amount of thought as an ugly tie, but gift cards still deserve a place.
September 18, 2008 at 11:12 am
I have to agree that it’s nice to be able to ask for a gift card to a certain merchant if you are saving for a special purchase, provided the gift giver asks what you would like.
I personal enjoy the occassional gift card, but I prefer to give a proper gift whenever I can. I enjoy recieving movie money or a gift card to my favourite clothing store. it allows me to buy something for myself that maybe I wouldnt’ have otherwise, or a free night out.
Last year I ended up giving my mother & step father a gift certificiate for dinner & a movie. They really enjoyed a free date night. They have a small home and more than enough *Stuff*. Sometimes they are a good alternative.
For those who are buying for people who don’t live in the same area, consider buying on-line. A lot of merchants will gift ship to the recipient and it won’t cost you any extra. Chapters & Amazon are great for this. Costco, Sears & Canadian Tire also does.
Gail I never thought of the environmental implications before. Thank you for mentioning that.
PS: I have to admit I still have a gift card from last Christmas that I haven’t used yet. I think I’ll go buy some nice PJ’s for the cold months coming.
September 18, 2008 at 11:41 am
I have a love/hate relationship with gift cards. I don’t mind getting the occassional gift card and I occassionally give one as a gift. These are great if they are to a store that you would go to anyway. As someone else mentioned it is a great way to save up for a specific item or project. I usually include them as part of a larger gift. I don’t lose them as they alway go in the same spot and the state of California doesn’t allow the stores to charge any fees or have expiration dates. That being said I have occassionally had to call the company to have the value on the cards corrected. The company I work for gives out $100 gift cards to the grocery store every December which I love since we all spend more money than normal entertaining. As to the environmental impact it is really valid. They always give me the card back after it is empty. What am I supposed to do with it? It would be nice if they kept them and recycled them.
September 18, 2008 at 11:57 am
I have to admit I love gift cards, however, the environmental aspect of them is part of the reason I’ve gone to wishlists on Amazon. Also I get something I want & like and it’s super easy to use for the giver.
Last year for Christmas I collected little things made here in the Yukon and created 3 packages (my mother wanted a gift card, so I sent her one – easy enough) to send to family and my best friend. They didn’t actually leave until sometime in Feb or March, but they were really well received and all the items were edible, wearable or otherwise useful (calendar, etc).
They didn’t cost me TOO much (apart from postage to the UK…ouch!), but it was really worth it to hear how much they loved what they got. It meant I made really good, really worthwhile choices and I plan to do the same thing this year.
And it was fun to have Christmas after Christmas, too!
September 18, 2008 at 12:00 pm
I do make use of certain cards for my fellow low-income senior friends and relatives, particularly those who live out of town. For instance, when I can afford to do so, I mail them a gas card, a card for their local food store, or a L.D. phone card. These are all very much appreciated by the recipients.
So, as with everything else, certain cards have their uses.
Gail – I love your show, bought 2 of your books many years ago and your advice helped me, especially now that I am a senior on very limited income. I also enjoy your blog and all the replies coming in.
Pat
September 18, 2008 at 12:30 pm
I like gift cards, as long as I know the person I am giving it to will use it. As well, I enjoy getting gift cards for stores or restaurants I enjoy shopping/eating in. For myself and many people in my family, we don’t have a lot of disposable income to indulge oursleves a bit, or eat out, so we can give that to each other on birthdays and at Christmas. The only time I buy someone a gift card when I’m not 100% sure if they will use it is my kids teachers at the end of the year.
If I get cash instead, the practical side of me often puts it in the savings account instead of enjoying it, which is what it was intended for. I don’t feel guilty when I get a gift card to use. My son, who is 10, loves books and loves to get gift cards for bookstores. It allows him to buy large books he normally couldn’t afford, and he loves to pick them out at the store.
I know this isn’t the perfect solution, but I wonder if the plastic cards can be recycled?
September 18, 2008 at 12:38 pm
I’m not on board with you this time, Gail. If I know that my cousin, who lives 4000 miles away, likes to buy his shirts from store X, then by sending him a gift card for that store I save on shipping fees AND I know that he’ll buy something with it that fits him and that he really likes.
Could I just send cash instead? Sure, although it’s seen as gauche to do so. But there can be very practical reasons for preferring a gift card to cash. Sometimes you like to know that the person will spend it on themselves rather than others (e.g. their bratty kids). Sometimes you want to make sure that the person doesn’t spend it on something you disapprove of (e.g. an addiction). And they’re a great way to give someone an “experience” gift, like a travel gift card for a trip you know they want to take, a movie gift card, etc.
I agree that gift cards can be overused, but I always send out a few for a variety of the above reasons.
September 18, 2008 at 1:36 pm
I work part time at Best Buy and I have had a couple of parents of young adults (University students) ask me where the gift cards are. The reason they want a gift card is that if they give their kids cash for a gift they will just spend it at the bar or on smokes. This way they have to buy something with the gift card instead of the money just disappearing.
Great topic Gail! I have a love/hate relationship with gift cards and I admit I have one card from last Christmas that I still haven’t used!
September 18, 2008 at 2:08 pm
I love giftcards. We often get gifts we never use, and when asked, we asked for gift certificates for our favourite restaurant. I also appreciate a gift card to be able to buy what I like (a real treat for me). I never have a gift card I haven’t used, especially at January sales!I understand the enviromental concern, though. It would be better if they went back to certificates. I also enjoy giving giftcards, as I find it a real chore to try and buy what I think people would like.
September 18, 2008 at 2:12 pm
Let’s REMEMBER that gift cards are usually a “set” amount-$20,25,50, 100, etc.
So when you RECEIVE a gift card-not only is it not a true gift..but since when does the price of a product including it’s tax EQUAL the “even set amount”?? NEVER!
So either the receiver has to now spend his own money to cover the remaining cost….or the gift-card giver has to lose money directly to the store because they don’t refund the remaining balance.
GIFT CARDS ARE ALWAYS LOSE-LOSE!
September 18, 2008 at 2:28 pm
Our extended family has gone the charitable giving route for gifts since none of us needs any more “stuff” – http://www.scaw.org/ (sleeping children around the world – bed set gift) and http://www.greatgifts.org/GiftCertificateSelection/GiftCertificate.aspx?CertificateID=670&adid=dgmvenxmas08 (world vision – a gift of a rooster and two hens, for example); https://catalogue.worldvision.ca/gifts/Forms/Gift.aspx?giftId=1552 (Canada’s most meaningful gifts). My sister, an elementary school teacher, gets more than enough generous gifts from her students, and was delighted to receive a note that in her name, one of her students had bought a gift of a rooster and two hens for a needy family in a third world country. Just a thought.
September 18, 2008 at 2:47 pm
Gift Visas are the most flexible, but I notice you are dinged right off the top to get one for someone!
I personally like getting gift cards and have even asked for them for Christmas. (It’s the thought that counts and the card takes up WAY less room than some nonsense brick-a-brack gift.). I like the ones that are consumable and fun like movies, restraunts — stuff that I wouldn’t normally get for myself but still enjoy. My favourite gift certificates received are for the local recreation centre (swim or skate). But I feel like I am cheating when I get a gift card for someone…. it seems like I ran out of ideas.
The exception is starbucks or timhortons cards are great for getting for the kid’s teacher at the end of the year. Along with a nice home-made card, it is a painless and clutterless consumable gift for the teacher– they always look relieved to see a slender envelope instead of another box of chocolates or “best teacher” trophy.
September 18, 2008 at 4:45 pm
That is so interesting how much money they make off of people not redeeming their giftcards. Insane! I sometimes like them but you’re right, they are bad for the environment and I find it really annoying when a store won’t give you cash back and insists you keep the small amount on the card and use it later. I’d rather have my change! It is a rip-off in a lot of ways and really, how is it different than giving cash? Big deal, you had to go to a store to buy the gift card but it’s a set amount so no different than handing over $20 except this time it’s plastic and limited.
September 18, 2008 at 5:49 pm
I agree with Ginny and Rebecca…
Gift cards have their place. It is too bad when people give them because they don’t know what else to get somone… but if a person is saving up for a larger item, why not contribute wtih gift cards to the store they would buy it from? Or if someone loves a particulair store, why not help them get something a little extra by giving them a gift card there?
My mum lives in New Zealand and I’m in Canada. I have been getting her gift cards to various places near her. One year it was the spa. This year, I’m planning a garden store. This way she gets something wouldn’t have otherwise treated herself to, and I don’t pay an arm and a leg in shipping costs.
They aren’t a good fall-back gift. And they aren’t always the most personal… but they have a place.
September 18, 2008 at 5:52 pm
Gail, what do you think about giving cash as gift? In the Chinese culture, when people get married, guests would offer cash instead of buying a gift to newly wed couple. I once said to a friend of mine that it was a great system, since you would not want every gift that you got. However, the friend told me that some people actually would be offended if they got cash instead of an actual gift!
I would love get cash for the upcoming Christmas, by the way, since I’m still in debt. Having the debt paid off would be the greatest gift.
September 18, 2008 at 8:38 pm
I don’t get why giving cash is tacky but giving a piece of plastic with a dollar value assigned to it that you can only spend in one store is not. What’s the diff people? It’s lost on me. I get that if you have people you don’t trust to do the right thing with the money that you might not want to give them cash. But then why wouldn’t you buy them something they need? Or don’t you know them well enough to know what they need?
September 18, 2008 at 9:24 pm
Gift cards are the best gift sometimes. My inlaws really enjoy going to dinner and the movies, but with a limited income it’s a real treat. Believe me, they do not need any more knick-knacks (they are literally tripping over the ’stuff’ they have), have plenty of clothes etc. The grandkids (now adults) pool their funds and purchase gift cards for the movies and for restaurants that they like. As their kids, we pool our gift money to purchase larger ticket items that will make their life a little easier – like monthly housecleaning. All gift cards / cash gifts are not evil. Sometimes knowing the person well enough means knowing when a gift card is the perfect gift. (note to self…if in the position to purchase a gift for Gail do not buy gift card…lol). Also, we usually place the gift cards in a nice basket along with a few small items pertinent to the gift giving occasion (like a snow brush in the winter, new pair of those mini gloves, some homemade treats etc). Sometimes those cards are also very practical…I can’t see my hubby knowing which sewing machine or fabric I want but believe me I would be thrilled with a gift card to my favourite sewing store…he also knows me well enough to know that if he gave me the cash I would end up putting it towards something for the house or the kids instead of for me!
September 19, 2008 at 12:40 am
Is it really so tasteless to give real live green paper money in a card? Why is the receipient embarassed or offended..this is part of the reason so many people are in debt…they don’t want to see or deal with real money.
If real physical money makes you cringe and makes you embarassed to receive it as a gift, do you really need a gift?
Who’s not thankful for real money these days? Plastic hides the actual connection to money.
Give your time to the person…that really is worth more than gold. If they’re not worth your time….then why are they worth your hard earned paycheque or savings in the form of a gift card??
September 19, 2008 at 1:38 am
Angela is right about giving cash to couples in China getting married, although the money tends to go towards the extravagant wedding reception. HSBC (which used to be a Hong Kong bank) has cash cheques which people buy (no cost, just dollar for dollar) to give to the couple at the reception. The only decision is the amount, which must be lucky.
As for gift cards, there are several available in Hong Kong. But they can be bought at 7-11s. If you get a gift card, you are likely to think that the person couldn’t be bothered (or forgot) and just popped in the nearest convenience store. Makes cash seem more honest.
I knew a woman who would give cash but made the notes into lovely origami figures. No one minded the cash; who would when they were trying to figure out how the bunny rabbit was made!
September 19, 2008 at 8:37 am
Most gift cards are now re-loadable and my mum in England uses a gift card for her grcery store to save for Christmas expenses. Each time she goes grocery shopping she adds $5 onto her card. When Christmas comes around she redeems the gift card for her extra’s. I personally would prefer to recieve a gift card for clothing/book store, so that I can pick out my own items. This year I am thinking of a gift certificate for my Mom-in-law who has just moved and needs plants for her new yard. This way she can pick out her own plants. I “could” give her cash I guess but that would involve me actually going into the bank and trying not to spend the cash on something because it is there (I have a problem with “cash” in that I spend more if there is cash laying around than if I can’t “see” it on my debit card- I know backwards!) Plus I can see what I bought on my statement when it comes instead of some random cash withdrawal.
I guess I am pro-gift card
September 19, 2008 at 11:07 pm
I don’t feel very strongly, really, since I rarely give or accept gifts. My family pretty much expresses celebration over food. However, there are cases where a gift card can be preferable to cash.
1) If you know the person will not spend the money on something nice/for them/legal. My mom would probably spend money on groceries and I would probably just add it to my budget for the month.
2) If you’re an employer and a cash gift would be taxable.
Preferably, though, cook me a meal or a treat. I’ll appreciate the effort and the company way more.
September 20, 2008 at 8:39 am
J: even if it a non-cash gift, it is taxable. By law you must pay tax on the benefit you received.
September 21, 2008 at 1:53 am
Thanks Gail – you’re correct, in that apparently a near-cash gift is always taxable:
http://www.cra-arc.gc.ca/E/pub/tg/t4130/t4130-e.html#P556_50763
My employer should REALLY know better. Not that I necessarily work for CRA…
Apparently non-cash gifts are ok, according to that page, as long as they’re under a cumulative value of under $500/year. I guess another reason NOT to give gift cards!
December 4, 2009 at 8:37 pm
Gift cards may seem impersonal to some, but after years of trying to guess what DVD or CD my children want or don’t already have, I decided to go this route this year. Half the fun is picking out what you want, I think! I’m hoping all will enjoy receiving these in their stockings.
December 6, 2009 at 10:57 am
I’m always leery about gift cards not “working” at the till, so I prefer cash. I give my teenage sons cash in birthday cards all the time, but I go to the bank and get $50 or $100 dollar bills. It seems so impressive that way when they open their card! And I’m sure it makes them think twice before spending the large bills. Cash gifts can have a downside though, for a while counterfeit bills were a problem in my city and stores were not accepting $100 bills.
August 27, 2010 at 2:14 am
I looooooove gift cards. Then again, I loooooove cash too!
I love receiving a gift card because it gives me a chance to buy something for myself that I wouldn’t necessarily spend my own money on. If I get one for a store such as Walmart, I can then chose to spend a portion of it on myself and a portion on groceries, necessities, etc.
I will only give a gift card if I know that the receiver likes that store. My best friend loves eating at The Keg but cant’ always afford it, so a $30 gift card goes a long way. You can also get gift card for entire malls which work well. My mother and sister both live 5 mintues from a large mall so a gift card to the mall opens up a whole array of options.
Of course, cash is always good too. When I get cash I tend to either stash it for one of those mini-emergencies where you don’t want to have to run to the bank or I just put it on my debt.
My birthday is coming up soon so I know I’ll be getting cash from both my parents and my in-laws….. I wonder what I’ll do with the money this time.
Cristina