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8 need-to-know tips for gift cards

There's no denying the popularity of gift cards. You'll probably be getting or giving one this holiday season. As a last-minute gift, it's a no-brainer. But there are some things both the giver and the receiver need to know to make the gift worthwhile.

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According to the National Retail Federation, 52.8 percent of consumers surveyed said they would like to receive a gift card for Christmas.

Total gift card spending in 2006 amounted to $24.81 billion, up from $18.48 billion in 2005. And the average amount spent per gift card rose to $39.16 from $33.42.

So whether you're getting or giving, here are eight things to consider when buying or spending a gift card.

1. Fees for cards
When gift cards first began gaining popularity a few years ago, many retailers charged a flat fee to you to buy the card in addition to the amount you loaded onto it. Not anymore. Retailers have found that the average "spend" beyond the face value of a card is 25 percent. They don't have any reason to charge you a fee for the card; they just want to get you into the store.

Why does this happen? If you get a gift card for $50 and buy an item for $40, you don't get the $10 difference back. So shoppers tend to spend more than the $50 to use up the whole card.

Gift card check list

On the other hand, American Express, Discover, MasterCard and Visa charge a fee for each card, ranging from $2.95 to $10.95. You can use the card anywhere these cards are accepted, so you're paying that fee for convenience. On the issuer's side, this is how they're making money -- you're not buying their merchandise, just the card, which may be spent anywhere.

When you purchase a gift card, think about the recipient. If you know where they like to shop, you can avoid the upfront fee and buy a card at a particular retailer. If you want to give them the freedom to choose where they'll purchase their gift, you'll have to pony up the extra fee for the "use anywhere" cards.

2. Expiration dates
According to Bankrate's third annual Gift Card Study, the major retailers do not have expiration dates on cards issued for their stores. However, cards issued by the "big four" -- American Express, Discover, MasterCard and Visa -- expire a year after they are issued. The term "expiration" is misleading: You can still use the card after that date, but a monthly fee of $2 will be charged after a year is up until no balance is left on the card.

If you get a card, be sure you check to see if and when it expires. If you give a card, be sure that information is either on the card itself or on the terms and conditions.

3. Terms and conditions
The terms and conditions for gift cards must be printed on the card or on a separate piece of paper that the buyer receives when the card is purchased. These outline expiration dates, uses and any other fees that apply to the card. For example, some gift cards are for use only in brick-and-mortar stores, not online.

The terms and conditions are often printed on paper just like the receipt for the gift card. Rarely are they on the card itself. Remember to give the terms and conditions to the recipients with the cards. That way they won't be disappointed or frustrated trying to redeem them.

Next: "Gift cards from other airlines are sure to be taking off soon."
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