Day Three: Gift Cards Can Help Take the Guessing Out of Holiday Gift-Giving

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Many times, most of the time, probably, “You shouldn’t have …” really means, “What were you thinking?”

To avoid seeing your gifts in the regift or exchange piles, give a gift card.

With a gift card, you don’t have to be a mind-reader and divine what will make your loved ones’ eyes light up with gratitude, not rage.

They can buy what they want. And after the holidays, there are so many bargains available that a $50 gift card can easily become a $100, even $150 or more, gift.

Gift cards are offered by banks, shopping malls, retailers, airlines, restaurants, hotels, Web sites and even state parks. And you don't have to go far to find them; many supermarkets and drugstores display racks of gift cards conveniently near the checkout.

But not all gift cards are created equal.

Some can be the gift that keeps on giving … Grief.

Some are loaded with fees, expiration dates and other hassles for the person who gets one.

Here are some tips to make sure you find the card that’s right for you.

Bank-issued cards often hit recipients with fees, expiration dates and other fun things. Retail cards generally aren't as troublesome, but some lose value or expire if you don't use them quickly. Laws and regulations vary by state.

A spring 2007 survey of 1,500 consumers nationwide, conducted by WSL Strategic Retail, of New York, found that gift-card fees and expiration dates were among the top causes of frustration.

And that's just among people who attempted to use them.

TowerGroup, a research firm in Needham, Mass., estimated the value of unused gift cards in the United States at $8 billion for 2006. In its fiscal 2006 annual report, the retailer Best Buy revealed a $43 million gain from gift cards that were unlikely to be used.

Similarly, an October survey of 1,003 adults conducted by the Consumer Reports National Research Center, found that 27 percent of those who received gift cards during the 2006 holiday season had not used one or more of them nearly a year later.

That’s nearly a 50 percent increase from the previous year, when 19 percent of consumers had one or more unused gift cards. More than 33 percent of those responding said they didn't use the cards because they either forgot about them, lost them or the cards had expired. But the most common reasons people gave for not spending their gift cards were that they didn't have time to shop, at 58 percent, or couldn't find anything to buy, 35 percent.

But gift cards remain popular, not only among givers but also among receivers.

TowerGroup projects gift-card sales will top $100 billion in 2008, compared with estimates of $80 billion in 2006. One survey found that 62 percent of consumers plan to give gift cards this year, second only to clothing at 71 percent. They are also the most-wanted gift among women and rank third with men.

Retailer-issued cards generally can be used only at the issuer's stores, possibly other stores owned by the same parent firm. Retail cards are the least likely to expire or have fees. And there's usually no charge to buy them because retailers make their money not on the cards themselves but on the products and services that customers buy with them.

Bank-issued cards are different. They usually bear the logo of a major credit card and are accepted at most merchants on that credit-card network. Banks tack on a fee, typically $2 to $10, and possibly other charges when they sell the cards.

The terms and conditions of bank-issued cards vary widely, even among those with the same credit card logo. That makes it difficult for givers and receivers to know exactly what they're getting. Compounding the problem is that it's not always clear where to look for information, on the card, on the packaging or on the issuer's Web site.

There are far fewer regulations covering gift cards than debit and credit cards, so the risk of unauthorized purchases and billing errors often rests with the cardholder. Generally you won't get a statement showing activity on the card, though that might be available on the issuer's Web site. Another concern: If a card issuer goes out of business, its gift-card holders might be out of luck.

Whether you're giving or receiving a gift card, check the fine print, if you can find it.

Issuers don't always disclose all the fees, expiration dates and other unpleasant details on the card, or on the packaging that comes with it. To get the whole story, read the FAQs and the terms and conditions on the issuer's Web site before buying.

But even that might not protect you. Card issuers often give themselves the right to change the rules any way, for any reason. For example, the terms and conditions statement for the American Express Gift Card says the issuer doesn't even have to give you notice of any such changes.