Look this gift horse in the mouth

Gift cards are expected be one of the most popular gift items again this holiday season. And no wonder. You can buy them everywhere, they’re a green gift (no extra packaging) and there’s a card for almost everything now — including golf courses, spas and state parks.

Customized gift cards are the latest thing. American Express has nine types of gift cards, including ones for kids, teens and newlyweds. Use the movie-lovers AMEX gift card at certain movie chains and you’ll get a free box of popcorn.

According to a recent National Retail Federation survey, 88 percent of consumers plan to buy two or more gift cards this year. The survey found the average consumer plans to spend $122 on gift cards for a total of $26.3 billion, up $1.5 billion from 2006.

All gift cards are not the same
Buy the wrong gift card and it could be worth nothing when your friend or loved ones tries to use it. That’s because some gift cards expire. Others have inactivity fees that will reduce their value by a couple of dollars every month.

A Bankrate.com survey found that store gift cards are the best deal for consumers. There’s rarely a purchase fee, and most have no expiration date. Bloomingdale’s and Macy’s are the exceptions — their gift cards expire two years from the date of last value added. (Note: in some states, such as Washington, by law, gift cards sold by retailers cannot expire.)

Compare that with cards issued by shopping malls and credit card companies. Bankrate.com found that all the issuers they checked charge a fee on top of the face value of the card — from $3.95 to $9.95 — and all of these cards will eventually expire.

“You need to read the fine print to see what the terms and conditions are,” says Ellen Cannon, Bankrate.com’s managing editor. “It can make a big difference in the gift you’re actually giving.”

Consumer Reports has this advice: Think twice about giving gift cards issued by a bank. “While bank cards generally can be used at more retailers than store cards,” the magazine warns, “they're often loaded with fees and restrictions.” If you must give a bank card, the magazine says, find one that doesn't charge maintenance fees until at least a year after the card is issued.

Caution: It’s very risky to buy gift cards from online auctions or classified ads. The offer may be mighty tempting — a $100 card for just $25. But many of the cards sold this way are counterfeit or stolen. There’s no way to know. You could buy one and be left holding the bag.

The bottom line
Buying a gift card is easy, but it still takes some thought. What does the person like? Where do they shop? Is that card worth enough? It can be frustrating to get a $25 gift card when you can’t buy anything in the store for that price. And be sure to send along the receipt — it may be needed to replace a lost or stolen card — plus information on terms and conditions. If you receive a gift card, go online and register it.  This may help you get the card replaced if something happens to it.

More information

• Consumer Reports: Avoid Gift Card Pitfalls
• Bankrate.com: 2007 Gift Card Survey
• National Retail Federation: Top Ten Tips for Buying Gift Cards
• National Retail Federation: Gift Cards More Popular Than Ever

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