When it comes to gift giving, I like to keep things simple. For friends who love my homemade granola, gifting is simple. For my 20-something son working a new job in an expensive city, cash is simple (and very, very welcome.) Gifting time, an offer to babysit or help with a resume — simple. One gift that is never simple? The gift card.
For those on my gift list whom I typically gift money, I always stick with the green stuff, and here’s why.
1. Cash saves your giftee money. Research by behavioral economist Meir Statman indicates that gift cards tend to lead users to spend more than the face value of the card, as well as spend on more conspicuous consumption — and they are two-and-a-half times more likely to pay full price for items. (Do those gift cards so regularly supplied by his numerous aunts and uncles inspire my son to spend well beyond the card limits? Yes, they do. That $50 gift card to the GAP resulted in a $100 purchase on various long-sleeved tees that were pictured online with the shirt he set out to purchase.)
2. Cash does not require endless parsing of the fine print. With gift cards, you need to be savvy about state and federal rules for the card, along with the card’s own set of requirements. Live in California? Count yourself lucky: It's against California law to put time limits on most gift certificates. Citizen of Delaware? Not so lucky. For types of property such as gift certificates, the state claims possession after five years.
And don’t forget to check for inactivity fees. Some cards sock you with monthly inactivity penalties after just a year — which can deplete your card’s value at a rapid clip. (The website ScripSmart gives ratings to states based on the degree of consumer protections they have in place for gift cards.)
3. Cash gives you, quite literally, your money's worth. You likely won’t forget to spend the cash you were gifted, but a gift card can easily end up being tucked away and forgotten. According to a Consumer Reports survey, a quarter of Americans who receive them during the holidays have at least one lying around 10 months later. The reasons? Thirty-seven percent said they hadn’t found anything they want to buy, 36 percent said they hadn’t had time to use the card and 34 percent said they’d forgotten all about it. All in all, a mind-boggling $1 billion goes unredeemed each year on gift cards, according to data research firm CEB TowerGroup.
Don’t forget either that widely accepted gift cards with bank logos like American Express or Visa often have an activation fee or purchase charge, around $4 to $5, and losing a gift card can mean hefty replacement fees or even no option for replacement at all (the policies at Abercrombie & Fitch and Puma, for example). You can more easily replace a bank-logo gift card if it’s lost or stolen, but only if you were diligent about recording the number so you can offer it as proof.
Obviously someone has spotted the revenue potential in all those unused gift cards and is cashing in on it. CardCash.com will buy your unwanted gift cards for around 80 to 85 percent of their face value and direct deposit — wait for it — cash into your bank account. The company’s ranked among Forbes' top 100 Most Promising Companies in 2013.
Truly, I wish gift-giving could always be as simple and soul-satisfying as making or buying the perfect gift for friends, families, colleagues. But when the choice is to give cash or gift cards, the most thoughtful gift remains the one unencumbered with fees and fine print.
Writer Terri Trespicio doesn’t agree. Read her side: Cash Is Crass: It’s a Gift, Not a Fees Transaction!