Personal Finance

What Is Gift Card Used For

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 6 minute read

There is no gift-giving occasion that gift cards aren’t appropriate for. They provide a practical means of customizing a present for a single recipient while yet providing them some say in the matter.

This article will explain the many gift card options available, why stores provide them, and how to maximize their value, whether as a present or for personal use.

The Fundamentals of Gift Cards

Before anything else, make sure you know the difference between the two kinds of gift cards:

Cash Cards

Companies like Visa, MasterCard, Discover, and American Express back reloadable prepaid debit cards, making them usable worldwide.

  • These cards provide the most versatility because they may be used virtually anywhere credit cards are accepted. It’s nearly the same as carrying cash. They may also be used to pay bills online. They spare the receiver the trouble of replacing a sweater for the correct size or returning a book they already possess.
  • These gift cards are the least personalized choice offered as a present. Even though the receiver will still enjoy it, it is not an ideal present for a close friend because it is effectively a cash alternative.

Store Cards

Gift cards from Macy’s, Banana Republic, or Victoria’s Secret can only be used in those stores.

  • The positives of these cards are that they allow you to add a more personal touch to your present. Gift cards to the recipient’s favorite retailer are a thoughtful and convenient alternative to traditional birthday, graduation, or “just because” presents.
  • However, although it’s nice that so many different retailers provide gift cards, it’s a bummer that they all have different rules for using them. It is especially important to watch for expiration dates when shopping at smaller, neighborhood stores. Some gift cards and certificates, for instance, have a validity period of 30 to 90 days. In the tiny print, you’ll often see a demurrage policy, which means the card’s value decreases by a little amount each month. Even if you give a buddy a $50 gift card, after four months it will only be worth $40 because of the $2.50 monthly loss in value.

Who’s a Fan of ‘Em?

Sellers

Retailers are huge fans of gift cards. Gift cards may be purchased at nearly any retailer, from the most well-known chains to the tiniest mom-and-pop operations. There are a few basic explanations for this:

  • Whether or whether a customer actually uses the card, the shop still benefits from the sale. To avoid spending the final few bucks, some people just misplace their cards or forget about them. Those are encouraging words for any shop owner to hear. Shops receive the money quickly, and they can only benefit from this arrangement. You’ll either spend the entire amount, leave some of the money on the table, or buy extra stuff nonetheless.
  • It usually leads to higher sales for the company. It’s likely that the recipient will spend more than the amount remaining on the gift card after redeeming it. Customers who are satisfied tend to spend more money and return for future purchases.

Banks and Credit Cards

The credit card industry has been participating for some time now. By assisting with logistics and advertising, they encourage retailers to implement more extensive gift card programs. These financial institutions benefit because they are reimbursed a portion of the merchant costs incurred when customers use their cards.

Consumers

Gift cards are a lucrative business for merchants and financial institutions, but customers aren’t always on the losing end of the bargain. Be the winner in the situation by giving yourself the upper hand. Don’t waste any of the money on unused gift cards. Use these guidelines instead to increase your chances of winning a gift card.

The Gift Card Game: How to Win

It’s on you to use good judgment as a present-giver and a recipient of gift cards. Before buying or using a gift card, keep in mind these three things:

  1. Flexibility

Cash cards are practical since they may be used anywhere that accepts major credit cards. Store gift cards, on the other hand, may only be used in that store. Moreover, it is uncommon for stores to let you redeem store cards for cash.

  1. Cost

Gift cards can be used in any store for the purchase price without any additional fees. But cash cards like Visa cost you money to get. An extra $1–$5 is added to the purchase price of a card with a $50 face value.

After the first year, cash cards begin to assess a monthly maintenance cost, often between $2.50 and $5. This can quickly deplete the card’s funds. It’s important to utilize gift cards within the first year after receiving them, otherwise they may lose their value.

  1. Expiration

Using a store card is preferable here as well. Gift cards from major retailers typically never expire. A gift card can be redeemed for cash in the event that a retailer no longer exists, but it will be useless otherwise.

Cash cards, on the other hand, often expire five years after they are issued. It may seem like a long time, but if the card expires or gets lost, you might end up losing a lot of money very quickly.

Selecting the Best Gift Card

Before buying that gift card for a friend or family member, think about whether or not they will really use it. Even while a massage or new shoes seem great in theory, are these things that people actually desire or need? Before deciding on a gift card, it’s important to think about the recipient’s likes and dislikes.

Do they, for instance, enjoy eating at restaurants? In such cases, a gift card to their go-to eatery is in order. If they are really particular or already appear to have everything, a simple gift card together with a touching message should suffice. What they buy with it is entirely up to them, which is something they’ll value very much.

What Should You Do With Unwanted Gift Cards?

A lot of us have received gift cards we didn’t want and wondered how to make them useful. Consider that, because of their adaptability, cash cards typically get the highest resale prices. I hope these suggestions may serve as a springboard for your own creativity.

  • Put it up for auction. The demand for gift cards in the digital realm is strong. Gift cards may be sold on eBay and other specialized websites like Raise.com. These retailers will buy your gift card for a steep discount.
  • Donate It or Sell It. The ability to swap gift cards for things from other vendors is a common feature among sites that facilitate the sale of gift cards. If you’re looking for alternatives, bartering sites are another good resource.
  • Give it out as a present. For some, this may seem like a wonderful method to spread love, but for others it may be a dreadful social taboo. You should use discretion and only regift an unused card that has not yet been used.
  • Make a charitable contribution. You should check with your preferred charity to see whether they will take your gift card. In that case, you can claim a tax deduction for the amount you gave to charity.

Bottom Line

When shopping for someone who is particularly difficult to buy for, a gift card might be a lifesaver. That being said, you should give some consideration to the card you purchase to ensure that it will be utilized and that your money is not squandered.

Use the card right away so you don’t forget about it, or check out the sites I listed above to see if you can exchange it for something more to your liking.

The most crucial thing to do with each new card is to check its expiration date and maintenance fees as soon as possible. When presenting a gift card, be sure to specify whether or not the receiver has a certain amount of time to utilize the card.

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