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Image: Gift cards
Kathy Willens  /  AP
Holiday gift cards that can be exchanged for food are shown on a rack at a Pathmark grocery store in Brooklyn, N.Y. The cards come in a denomination of the buyer's choice or in specific denominations, i.e., $25 or $50.
updated 11/8/2005 3:47:49 PM ET 2005-11-08T20:47:49

Are gift cards on your holiday shopping list?

If so, consider yourself trendy.

This year, 59 percent of consumers say they have bought or received a gift card, up from 36 percent in 2001, according to annual surveys by the ValueLink consulting group. In addition, more than half of consumers surveyed by the National Retail Federation said they’d like to receive a gift card as a present this year.

For many retailers, gift cards now represent a significant portion of sales. Starbucks has sold 58 million of its gift cards, worth more than $1 billion, since they were introduced in 2001; they now account for 11 percent of the company’s North American retail revenues.

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What’s behind the boom? It’s simple. Plastic, wallet-sized cards replaced paper gift certificates. The electronic storage of funds makes gift cards easy to buy and redeem.

“When the certificate had to be written by hand, you couldn’t just grab one and buy it,” said Len Gilbert, who runs Barnes & Noble’s gift card program. “And nobody would think to carry those pieces of paper in their wallet. But when it’s a piece of plastic, it gets used more.”

Besides, a gift card is no longer a “cop-out gift. Now it’s seen as really giving choice,” Gilbert added.

Convenient alternative for shoppers
Because gift cards can be purchased over the Internet and even sent by e-mail, they’re especially convenient for shoppers who dread long lines.

“They’re ideal for the last-minute shopper or anyone who doesn’t have the ability to get the gift to the person,” said Jill Ambrose, marketing vice-president for www.giftcertificates.com, a one-stop shop for gift cards from hundreds of retailers.

Some chains even sell gift cards at other companies’ stores — like Pathmark supermarkets and CVS drug stores, where you’ll find racks of gift cards for unrelated retailers. Some cards are dressed up with themed designs — snowflakes, snowmen and the like.

But does a gift card suggest that you didn’t care enough to select a more personal present? Don’t worry. Etiquette expert Peggy Post from the Emily Post Institute (and wife of Emily’s great-grandson), says gift cards are perfectly acceptable, especially when you’re not sure what the person would like. “A lot of recipients enjoy having them,” she said.

Just beware: Some cards have expiration dates. Others — especially from banks or credit card companies — come with “an abundance of fees and limits, which greatly reduces the monetary gift you’re giving,” said Jeffrey Strain, who runs a Web site about consumer savings called www.savingadvice.com. “These can include a monthly maintenance fee, shipping and handling fees if purchased over the Internet, service fees, and ATM fees if used to get cash.”

On the other hand, a fee may buy convenience. At www.giftcertificates.com, e-mailing a gift card is free, but it costs extra to snail-mail or deliver overnight. The Web site’s “SuperCertificate,” which is redeemable for gift cards from a variety of merchants, comes with a 95-cent fee when delivered electronically.

If a card never gets used, or if only part of the value is used, merchants keep the change. Consumers who do use up their cards are likely to add cash to complete the purchase. A 2005 ValueLink survey found that 56 percent of gift-card recipients spent more than the value of the card.

‘An interest-free loan’
And when you buy a card today and redeem it in the future, “you’re making an interest-free loan. You are making a loan to the Gap or Barnes & Noble or Borders,” said Slate magazine’s “Moneybox” writer Daniel Gross.

Gross, who wrote a column called “Why Gift Cards Are Evil,” added that it’s silly to think gift cards are “better than cash or classier somehow. At the end of the day, you are giving them cash.”

But some consumers think gift cards are preferable to cash.

Ardythe Davis rewards her employees with gift certificates for the Wisconsin Restaurant Association, which can be used at eateries around the state. “If you give them an extra $10 or $20, it means nothing,” said Davis, who runs Ardy & Ed’s Drive In, a burger-and-fries place in Oshkosh, Wis. “But everybody likes to eat out.”

Davis also buys gift certificates to the Sundara Spa, in Wisconsin Dells, as a Christmas gift for her husband. “He really loves it,” she said.

Gift certificates for an activity or experience — like eating out or getting a massage — are a way for busy people to encourage each other “to put aside some time for themselves. It sends the message, ’I care about you,”’ said Jeremy McCarthy, director at La Costa Resort and Spa in Carlsbad, Calif., where gift card sales average $100,000 a month, a 28 percent increase over last year.

Cristi Smith of Johnston City, Ill., who participates in the SavingAdvice.com chat rooms, gives gift cards to teenagers “because I rarely know what they want.” She also gives restaurant gift cards to family members who “would never eat out otherwise.”

But she likes to receive gift cards, too: “Then I can buy what I want and not get stuck with something I will never use.”

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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