Teresa McUsic

Gift cards gain more protections for holiday shoppers

Six out of ten consumers have put gift cards at the top of their wish list this holiday season.
Six out of ten consumers have put gift cards at the top of their wish list this holiday season. BLOOMBERG NEWS

For the ninth year in a row, the No. 1 request for the holidays is a gift card.

As holiday shopping begins in earnest, it may be time to rethink the ease of use and desirability of those small rectangular cards, which are safer and more protected than ever.

Six out of ten consumers have put gift cards at the top of their wish list this holiday season, according to the National Retail Federation. Around 80 percent of us will be pouring a record $131 billion into gift cards this year, a six percent increase from last year and a huge increase from 1999, when the industry just took in $20 billion, according to CardHub.com.

Christmas soaks up half of gift card sales. Department stores and restaurants each take about a third of gift card sales, followed closely by coffee shops, electronics stores and entertainment venues like movie houses, CardHub said. General use gift cards from banks make up about a quarter of the industry.

Happily, as the industry grew so did regulation and safety practices. Now there are very few if any costs associated with the cards, and many have new safety practices, including PIN numbers and online registration to protect against stolen or lost cards.

“Gift card gotchas are much rarer than they used to be,” said Claes Bell, a chartered financial analyst who works for Bankrate. “Everyone should still do their research before making a purchase. But generally, consumers don’t have to worry about being swindled when buying or using a gift card from a major bank or retailer.”

In Bankrate’s annual survey of 60 of the most popular cards, just 8 percent had expiration dates (all were the general purpose gift cards issued through banks) and only 13 percent had a purchase fee (again the bank gift cards and some gas station gift cards). Five percent had a maintenance or dormancy fee (again, just the bank cards.)

All of the retailers, restaurants and airline gift cards surveyed came free of fees or expiration dates, Bankrate said.

Half of gift card providers this year included the ability to set up a personal identification number, or PIN, for added security, up from 35 percent last year, according to the survey. PIN-enabled cards include all of the bank cards surveyed; retailers such as Wal-Mart, Macy’s and Sears; and restaurants including Starbucks, Panera Bread and Pizza Hut. American Airlines and Southwest Air also included the PIN feature.

Many gift cards now include loss and theft protection as well, Bell said. Almost three-quarters of cards surveyed had some form of protection, although generally to be covered the gift receiver needs to register the card online and have the number on the card available for identification.

Bell said the best protection is to spend the card quickly.

“It’s not like it’s going to get more valuable over time,” he said. “Eventually they’ll get lost if they’re not used.”

While the amount of loss has been cut drastically from $8.2 billion in 2007 — what the industry calls “spillage” — there is still around $1 billion in gift cards not claimed, according to CEB Tower Group.

When purchasing gift cards online, be aware that some charge a shipping fee. All of the bank gift cards surveyed charged a fee, while nine of the 40 retailers charged for shipping, including Target. Of the 16 restaurants, only Starbucks shipped cards for free.

Electronic gift cards or e-cards are gaining in popularity, with two-thirds of issuers offering the digital feature, Bell said.

“There are real benefits to consumers with e-cards,” he said. “You use email, so there is a paper trail, it’s almost instantaneous and it’s less effort than going to a store and purchasing a plastic card.”

In purchasing your gift cards, remember you can buy them at a discount at several websites dedicated to the service. GiftCard Granny.com searches out all the sites that buy and sell gift cards to find you the best deals to get yours.

Deals offered this week shown on Gift Card Granny included 18 percent off a $35 gift card to Olive Garden; 18.5 percent off a $50 Old Navy card; and 20 percent off an AMC Theatre e-card. Other offers ranged from 25 percent off Burger King gift cards to 50 percent off of Dell Computer gift cards.

Be sure to include your receipt with the gift card, so if the card doesn’t work at the cash register or is lost, the recipient has paperwork to back it up.

Teresa McUsic’s column appears Saturdays. TMcUsic@SavvyConsumer.net