Save and Conquer

It is getting to be the Season of Giving. We have nearly finished our Christmas shopping, thanks almost entirely to my wife’s good planning. We are also increasing funds to a few favorite charities. We figure they will be hurting this year.

In the past, when I have run short on gift ideas, I have been known to give cash. I have also mentioned to my wife my dislike for gift cards When someone gives me money as a gift, I personally prefer not to be locked into having to buy my own gift from a particular retailer. The best discounts are often found elsewhere.

People argue that the VISA and Mastercard gift cards are a way to get around these complaints. While they may get past the problem of vendor lock-in, they have problems of their own.

Credit company gift cards typically charge an up-front fee and have a time limit after which they start to charge additional fees and eat up the value of the card. If a card is forgotten in a drawer for a long time, it could eventually become worthless.

Items never cost the exact amount of the balance on a gift card. That means the person using the card either buys something more expensive than the value of the card, having to add some of their own money, or they are left with some small amount on the gift card that is not enough for much of anything. Some states have laws requiring retailers to give cash for the remainder of a gift card. But many retailers will not honor this for cards that are not specifically from their store. In that case, you have to send to the gift card seller to get a refund for the remainder. What a hassle!

It is this hassle that the gift card companies are counting on to make a tidy profit. People tend to just stash unused gift cards with small balances and eventually forget about them.

Business Week had a good article on this back in January 2008 called, “The Scramble for Gift-Card Cash.” They said that over 8% of all gift card money does not get used. That is free money to the gift card companies. What a racket!

Why give extra money to credit card companies? I think they have enough money already. I want all of my gift money going to my intended recipient.

Another problem with gift cards in the present economy is what can happen to outstanding gift cards when a retailer declares bankruptcy. The LA Times had an article titled, “Gift card holders may be out of luck in retail bankruptcies,” that discusses this problem. Millions of gift dollars can go up in smoke when bankruptcy strikes.

If you want to give the gift of money, please send a check.

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