How to get the best deals on holiday gift cards

12/06/2013 1:06 PM

12/06/2013 1:08 PM

’Tis the season to buy gift cards — by tweeting?

Starbucks has come up with a new way to give a $5 gift through its tweet-a-coffee promotion. Simply use your Twitter account from Starbucks.com to send a tweet to a friend, which gives an electronic gift card that can be redeemed at Starbucks and will be charged to your credit card.

Social media is just one of the ways that merchants are giving consumers access to the $118 billion gift card industry, according to CEB TowerGroup’s annual gift card report.

According to the National Retail Federation, the cards are the No. 1 holiday gift for the seventh year. The average shopper will spend $163 on those little plastic rectangles this holiday season, according to the federation, so retailers will do all they can to facilitate the easy shopping solution.

But there are pitfalls along the way. And there are ways to save money.

Here are 10 tips from Card Hub, Gift Card Granny and the Better Business Bureau:

The lines are blurring between gift cards and prepaid cards. Retailers are increasingly trying to get customers to register their gift cards and reload them when funds are low, according to Card Hub. The reloadable Wal-Mart gift card, for example, is aimed at promoting loyalty and gathering consumer analytics for the company. This further confuses the distinction between gift cards, which have typically been for one-time use, and prepaid cards and could lead to increased costs for the receiver.

Watch out for faux gift cards. Sometimes consumers mistakenly buy prepaid cards thinking they are gift cards. A loophole in the 2009 Credit Card Accountability, Responsibility and Disclosure Act allows nonreloadable prepaid cards that are received through a loyalty, award or promotional program to expire with no restriction.

Regular gift cards don’t expire for at least five years from the date of issuance. Read the fine print on the card to figure out which kind you have.

Remember mobile. E-gift cards are growing, and as more people use smartphones, they’ll become even more widespread. That’s good news for time-crunched shoppers looking to avoid shipping fees or to buy at the last minute. But it could be bad news for consumers: If we forget about the cards in our drawers at home, will we stay on top of them in our phones?

Look for discounts. This is an easy way to save money on holiday shopping. Consumers can buy gift cards at discounts of up to 40 percent through exchanges like CardHub.com, GiftCardGranny.com and GiftCardRescue.com. Make sure the exchange has a money-back guarantee and shop early so the card arrives in time. Major retailers like Wal-Mart and Amazon.com offer only a small percentage off, but you can find some deals on cards for smaller retailers.

General-purpose cards are costly. General-purpose gift cards, like those from Visa and American Express, often charge fees, while store-issued cards generally have no fees. An annual study by Bankrate.com found that all seven general-purpose cards carrying an American Express, Discover, MasterCard or Visa logo had purchase fees. Five of them charge dormancy or maintenance fees, and three had expiration dates. So be careful what you buy.

Inspect the card before buying. Verify that no protective stickers have been removed and that the codes on the back haven’t been scratched off, the Better Business Bureau said. Report any damaged cards to the store. Some thieves take the numbers from cards and use the money for online purchases.

Be wary of troubled retailers. Before you buy, consider the financial condition of the retailer or restaurant. The card could become worthless if the business files for bankruptcy or goes under. Competitors may honor such a card, but it’s better not to risk it.

Don’t pay for shipping. Roughly 30 percent of cards from major retailers charge for shipping, according to Card Hub. You can avoid fees by using a gift card search tool to identify retailers that offer free shipping or digital gift cards, which can be sent directly to someone’s inbox.

Don’t be upsold. Retailers are increasingly offering you a gift card when you buy a certain number of cards, but it may be more than you want to spend. For example, PF Chang’s is offering a $20 bonus card if you buy $100 in gift cards. But did you really want to spend that much?

Scour your drawers for buried gift cards. The good news is that spillage — cards that are lost, expired or go unredeemed (or partly used) — is now less than 1 percent of all cards, down from 10 percent a few years ago, TowerGroup reports.

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