Day Five: More Tips for Buying Gift Cards

Are you considering giving a gift card instead of wracking your brain trying to figure out what gift to purchase?

If so, we recommend buying your gift card directly from a retailer to save on fees.

Gift cards purchased directly from retailers carry no fees, while cards from the big four credit card issuers and major shopping mall operators come with fees and expiration dates.

Gift card purchases are projected to reach an all-time high this holiday season, according to a September survey by Archstone Consulting in Stamford, Conn.

Archstone predicts total sales of $35 billion this year, an increase of 25 percent over last year's gift card sales. A study by Comdata Stored Value Solutions projected that in the 2007 holiday season, the average gift card buyer will spend $203 on cards, a $17 increase from 2006.

Teens have embraced gift cards faster than any other segment. According to the Teen Gift Card Survey commissioned by Comdata, 98 percent of teens between the ages of 14 and 19 have either bought or received a gift card.

For all consumers, the average amount of each gift card was $53, up from $46 the previous year. So don't look for gift card growth to slow down anytime soon.

The primary driver for the growth of gift cards is that a gift card allows a recipient to choose the gift they really want.

Card givers think: "When I give someone the gift card, I hope they'll use it on something they really want.”

If the card recipient decides to buy something that they couldn't have and now the gift card makes it attainable, that's an added bonus for the giver. Givers hope the recipients will remember who helped them get that gift, so satisfaction with gift cards can be high.

Another incentive is those after-Christmas bargains.

With the slow sales merchants saw before Black Friday, bargains galore will be available after the Christmas onslaught at the malls. Economists predicted the low sales merchants saw on winter apparel, caused by the unseasonably warm weather most of the United States experienced, might pick up when the holiday shopping season began. So far the verdict is out on whether sales are up or down, or stagnant at best.

Despite the wild popularity of gift cards, consumers still need to be aware of the terms and conditions for each card.

The Federal Trade Commission oversees gift cards and requires all gift cards to include a printed guide to terms and conditions with the card.

This is fine for the buyer, but it's the recipient who needs to know if and when the card expires, if there are fees for checking the balance or any other rules. So if you're giving a gift card, be sure you include the terms and conditions.

The distinction between cards with fees and expiration and those without depends on the issuer. The retailers' gift cards, known as "closed-loop" cards because they can be used only at that retailer, carry no fees. Bloomingdale's and Macy's cards have expiration dates.

Cards that can be used in many places, known as "open-loop" cards, have fees per card and are valid until an expiration date, after which monthly deductions are made until the balance is zero. The open-loop cards are from American Express, Discover, MasterCard and Visa, and the six largest operators of shopping malls.