Gift cards are a good gift under a very specific set of circumstances, but there are so many ways they can go wrong.
According to MarketWatch, $1 billion in gift cards purchased each year aren’t used, which is a lot of wasted money that stores get to keep without selling any actual merchandise.
There are three main reasons why gift card balances can go unused according to ID Superstore: loss or forgetfulness, infrequent visits to the store the card is for or consumers making purchases less than the card's value. These unredeemed gift cards that profit the store but do not involve the store selling items, is defined as “breakage.”
When you give a gift card for a store that the person rarely visits, you cause them to go out of their way to shop for what they want. This is especially a hassle if there are no store locations nearby or the person’s mobility is limited, like a student who doesn’t have a car.
However, there isn’t just money lost when the receiver doesn’t use the card. According to CreditCards.com, “When consumers redeem a gift card, 65 percent spend an average of 38 percent more than the card’s value.”
The problem isn't caused by the gift card funding part of a purchase the person would have made anyway, but when the person goes out of their way to use the card and purchase something they didn’t desire beforehand as well as spending money extra money on it, it can cause frustration.
Does this mean that all gift cards are bad? No, not at all. It means that in most situations, a better gift is possible. I don’t want to sound ungrateful for what I have been given, I just want to acknowledge the inefficiency I see in the practice of giving gift cards that are not given as intentional gifts.
Liz Weston of NerdWallet says in her article, “Gift Cards Are Not Gifts,” that though “Six out of 10 people responding to National Retail Federation surveys this year said they wanted to receive gift cards for the holidays … The rest of us may think of gift cards as a cop-out.”
Gift cards are a really great gift if the person has specifically asked for them, especially if the card is for a store or service that they use often or if the card is for a service they have been looking to utilize.
If you are unsure of what the person likes, gifting a prepaid debit card or cash that they can spend as they choose is likely a better option, which can go towards a purchase that the person wanted before having the incentive of the card.
Unlike cash, gift cards can malfunction when being unlocked by the cashier, codes can be stolen or the store can go bankrupt and no longer accept gift cards. Due to cash’s versatility, it has less risk associated with it. Not to mention, it’s hard to keep up with how much of a balance is left on partially used gift cards, so if you get to the store and don’t have enough to cover the purchase, it can lead to major awkwardness at the register.
For college students purchasing gifts, spending time picking out something your friend will like may be the less expensive option. According to a 2018 study by First Data, “33% spend MORE on a gift card than a traditional gift.”
The most important thing about purchasing gifts for people is that it has to be something they will find pleasure in using. As with any gift, a gift card is only a truly good gift if it shows that you know and care about the person you are gifting it to.