gift card: A gift with strings attached|
Editor's note: This is the 2005 version of the gift card survey. See the latest version here.
For many, gift
cards are the perfect size and color. But watch out -- they often lose value or
expire, Bankrate's 2005 survey finds.
The survey underscores the importance for both gift
givers and receivers to look closely at the strings attached to gift cards. The
buyer can be hit with purchase fees, activation fees and shipping fees, while
the user can be whacked again with inactivity fees or redemption fees. Be careful
or your $50 dollar gift card may not be worth $50 for very long.
the second straight year, Bankrate.com has surveyed the top 20 leading retailers
-- several of which issue cards under more than one store name -- and top four
credit-card issuers to examine the fees, expiration dates and dormancy policies
associated with gift-card purchases. A total of 34 cards were examined.
the findings of this year's survey:
offerings from the retail stores were generally more consumer friendly than those
of the credit card issuers. Only four retail stores
(Costco, Albertson's, Macy's and Bloomingdale's) place expiration dates on their
gift cards. Those expiration dates range from two to five years. All four cards
backed by the major credit card issuers -- American Express, Visa, MasterCard
and Discover -- have expiration dates, and that can arrive as quickly as six months.
out of the 34 gift cards listed in our survey assess fees if you don't activate
within 12 to 24 months. These issuers expect you to use the card or you will lose
a percentage of your money every month.
- Comparing Bankrate's 2004
holiday gift card survey to this year's survey, fees are relatively unchanged,
with one credit card issuer (Visa) adding a purchase/activation fee of up to $10.95.
Bloomingdale's dropped a $2 purchase/activation fee.
may have to order your gift card earlier this year, as many of the retailers have
indicated longer delivery times.
- They are becoming available
in more monetary units. Some companies also give you specific denomination amounts
if you order by phone as opposed to the Internet.
all in the cards
Gift cards have become increasingly popular: The average
consumer will spend $88.03 on gift cards in the 2005 holiday season, 15.6 percent
of their holiday gift budget, according to the National Retail Federation. Christmas
gift card purchases accounting for more than $17 billion in sales in 2004. That
number is expected to be $18.48 billion for the 2005 holiday season. "The
popularity and convenience of gift cards are here to stay," says Karen Larsen,
vice president of marketing and product marketing for ValueLink, a leading provider
of information processing and related services.
that, among other positives, gift cards provide a wonderful branding opportunity
"Gift cards also offer increased in-store
sales, because consumers tend to view gift cards as free money and will spend
more than the denomination on the card. It's also a win-win situation for consumers
because of their flexibility and choice."
But with the
positives also come the negatives -- especially when gift cards are fattened with
fees that either require the user to spend the amount on the card in an allotted
time or when companies demand surcharges for buying the card.
says that although expiration dates and fees still remain, the trend in the past
two years has been away from them.
the benefit of a positive customer experience." Over the years, she said,
"many retailers have done away with the fees and expiration dates."
The fees can add up. Let's say you want to buy a $25 American
Express gift card for a friend. If you call them on the phone, they'll charge
you a $7.95 purchase fee, plus a $5.95 fee for shipping it to your friend. And
if your friend decides he'd rather have cash, there's a $10 fee for cashing it
in, too. You paid almost $39 for your friend to end up with $15.
dates continue to be a major pitfall when using gift cards. The number of cards
with expiration dates went unchanged from 2004 to 2005.
of the 20 retailers and all of the credit card issuers surveyed by Bankrate continue
to place expiration dates on their gift cards. The expiration dates range from
six months to two years.
Dan Horne, associate professor at
Providence College and an expert on gift cards, says that fees and expiration
dates are the result of accounting rules covering the way the retailer moves income
from the balance sheet.
"Basically, gift card and
certificates sales are not booked as revenue until redeemed," he says. "If
they are never redeemed, then you never realize the income, even though you have
the money sitting in the bank. The fees let you transfer some of that money to
income every month."