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Exclusive   2006 Gift Card Study
  STATISTIC: Retailers have eliminated fees and expiration dates to be more  
  customer-friendly. But those terms remain on major credit card gift cards.  

2006 Gift Card Study

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Gift cards still growing
Americans are preparing for the holiday season -- the busiest spending season of the year -- and they are expected to spend $457.4 billion, according to the National Retail Federation. For years, apparel has been the No. 1 holiday gift. This year, though, the gift card is going to give that paisley tie or green sweater a run for the money.

According to the 2006 American Express Gift Card survey, 66 percent of shoppers plan to give a gift card this year, compared with 57 percent last year. (Apparel-givers are holding steady at 68 percent.) Another holiday survey by Deloitte & Touche showed that consumers are buying more gift cards, 4.6 cards per person compared with 3.9 last year. So whether you're on the giving end or the receiving, chances are there will be a gift card in your pile of holiday gifts.

For businesses, this means big bucks. Sales of open-loop gift cards (those from the major credit card companies that can be used anywhere the credit cards are accepted) are projected to reach $2.14 billion, up 60 percent since 2005, according to Tim Sloane, director of the Debit Advisory Service at Mercator Advisory Group. He expects closed-loop gift cards (those that can be used only at the retailer where they were purchased) to top out at $53.4 billion this year, a modest increase of 3 percent from the previous year.

If the post-holiday shopping season of 2005 is a guide, merchants will be busy well into January. A survey by Accenture conducted in January 2006 showed that 81 percent of gift-card recipients had already used their cards by the time the survey was conducted, and 43 percent planned to use them within a month of receiving the gift card.

"Kids are getting gift cards, and they have no other income," says Dan Horne, a gift card expert and marketing professor at Providence College. "They're going out to consume."

Retailers also benefit because recipients typically spend more than the gift card total. "At lower-end retailers, such as Target, customers spend 110 percent of the face value of a card," says Horne. "And it's 200 percent of the face value at the high end, at places like Nieman Marcus."

Fee frenzy
The great drawback of gift cards has been the fees associated with them. "The consumer is buying these cards, and they hand the card to someone else, and (the recipient) is the one who is bearing the cost," says Horne.

On some cards, there are maintenance fees if the card isn't used after a year, or an expiration date. There is a fee for replacing a lost or stolen card. There is a fee to cut a check if the cardholder wants the balance refunded. There is a fee to check available funds. But this may be changing.

Next: "People are continuing to buy open-loop cards regardless of fees."
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