Last Reviewed: 8/14/2010
GetDebit has some serious issues it would like to levy against these evil denizens of the consumer ecosystem. Since GetDebit is in the business of helping people maximize the value of the rewards, of which redemption of points for gift cards is a common option, it’s vital that we educate our readership.
Here are the 5 pitfalls of gift cards (there are probably a bunch more, but these will do for starters)
- Spillage: it should come as no surprise that a portion of gift cards are either lost, expire, or simply go unused (or partially unused). What *might* be a surprise is the magnitude of spillage. An analysis by the Tower Group estimates that roughly $5 billion per year in gift card value disappears due to spillage—enough to make even BP green with envy. We’d rather not have our readership contributing to this travesty. In its 2008-2009 fiscal year, Best Buy pocketed $38M in spillage.
- Fees: cards that have been inactive for more than a year can be assessed fees, which rapidly eat into the value of the card. If you had just given your niece cash, you wouldn’t have to worry about this ridiculousness.
- Bankruptcy risk: it’s nothing new, companies go out of business. An article by the New York Times noted that roughly $100M worth of gift cards was compromised in 2008, when both Sharper Image and Linen ‘n Things collapsed.
- Funds lock-in: A store gift card obviously requires the bearer to purchase goods and services only at that store. This can lead to sup-optimal purchases. For example, if you want a specific TV, and store A has it for $600, but store B, where you have your gift card, has it for $650, you may end up actually buying the more expensive one simply because you have this gift card.
- Lameness: Lastly, gift cards are just a lame gift. Put some thought into your gifts, and get screwed less in the process. If you simply are too hopeless, then just send cash.
If you do find yourself stuck with a gift card, you have some options. You can sell or trade it at sites like Plastic Jungle, GiftCardRescue, and Swapagift. You can also sell them on Ebay. In my experience, gift cards on Ebay tend to sell for somewhere between 85% to 95% of their face value, depending on the desirability of the card. This is why GetDebit discounts the value of gift cards by 5% when calculating their worth.