Seeing is Not Believing Part 13

The Gifts That Keep Taking

Here comes Christmas, a birthday, any event that calls for the giving of a gift. Everyone’s interests are so diverse that you might not even know what your spouse, neighbor, or third cousin wants. So you solve the problem by purchasing a gift card.

Just about every store now has them: grocery, clothing, beauty parlors, tool shops, and phone companies. Most people think that giving a gift card solves many problems, but actually it can create even more.

Most gift cards come with a time limit – use them within a certain number of months or the store starts deducting a percentage or cash amount each month for “maintenance.” Some of them expire completely on a set date. Thus if the person receiving the $100 card does not use it by the set time, you may be only giving $85 or $60, or nothing at all.

Stores like gift cards. Not only are they inexpensive to produce, it ensures that someone will be coming in to make a purchase. Frequently the item bought exceeds the value of the card generating additional profit for the store. This is one reason many stores now give such cards rather than cash when you get a refund – it ensures that you must come back, and you will probably purchase more than the value of the card.

Consumer Reports cautions against the use of gift cards: “Earlier this year, TowerGroup, a research firm in Needham, Mass., estimated the value of unused gift cards in the U.S. at $8 billion for 2006. And in its fiscal 2006 annual report, the retailer Best Buy revealed a $43 million gain from gift cards that were unlikely to be used.” Recently their parent company filed a report with the FTC about people losing the value of the cards when a store closes or files for bankruptcy. (Also see “$8 Billion in Gift Cards Went Unredeemed Last Year”.)

The FTC has been active, warning people that gift cards are not always the best way to go. “But before you buy a sack-full of gift cards from your favorite retailer, restaurant, or local financial institution, the Federal Trade Commission (FTC) wants you to know that some strings may be attached.” Among the problems reported are identity theft, loss of funds, counterfeit or fraudulent cards, and hidden fees. Be sure to read the FTC Fact Sheet (PDF file) about gift cards before buying or even accepting one as a gift.

With a growing number of scams revolving around gift cards, even those you buy in your favorite store might be tampered with prior to purchase. Think twice before purchasing one.

Additional resources:
New Gift Card Scams
Beware New Gift Card Scam
What is a Gift Card Scam?
Gift Card Fraud
Buyer Beware: Gift Card Scam Alert