How to Win the Gift Card Game: Step 1. Use Them

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Gift cards are the most popular gifts of the season, but there’s something to be said about being a bit more thoughtful and even going for the ugly Christmas sweater.

Gift cards are immensely popular because they’re easy to get, don’t involve making sometimes difficult choices and appear to give the recipient the power to choose what they want.

But they’re also a potentially losing proposition for consumers. Why? Because we don’t use them.

$32 Billion Expected This Year

For that same reason, businesses love them. What business wouldn’t like to be paid in advance? And what business wouldn’t like to be paid, and without doing anything illegal or even unethical, provide nothing in return?

We’re expected to spend more than $32 billion this year on gift cards, and much of it is going to be a big waste. Earlier this year, one study concluded that Americans had allowed more than $40 billion in gift cards to go unused over the past six years. Other studies came up with similar figures.

We’ll never be able to guarantee that Aunt Zelda is going to use her Sears (SHLD) gift card, but if she lives nowhere near a Sears and doesn’t shop online, we can be pretty sure it won’t be spent. But if she’s always downloading music on Apple’s (AAPL) iTunes, then an iTunes gift card has a pretty good chance of being well-received and used.

Be on Your Best Behavior

So, if you absolutely feel like you must gift a gift card, consider these tips:

  • Don’t give someone a card they cannot easily use.
  • Avoid gift cards from new establishments, such as a trendy local restaurant, because a gift card is of no value if the business disappears.
  • Try to give a card that can be used at an establishment the recipient frequents and avoid trying to get them to try something new because you gave them a head start.

And, keep in mind that not all cards are created equal. Cards that can be used in stores of all sorts — those with Visa (V), MasterCard (MA) or American Express (AXP) logos — often come with fees that diminish their value. And they also usually cost a premium on top of the face value.

That means reading the fine print on those cards, whether you’re a giver or receiver, to be sure the card doesn’t drain down on its own because of a dormancy fee while you’re deciding how to use it.

It’s All in the Details

The best rule to follow if you get a gift card: Use it as soon as you can. Avoid the temptation to put a card in a drawer until you decide when and how you might use it. Many never come back out again, and do you really want to make a donation to a for-profit business?

And the Federal Trade Commission offers these tips:

  • Avoid buying gift cards from online auction sites, because the cards may be counterfeit or may have been obtained fraudulently.
  • Inspect the card before you buy it. Verify that none of the protective stickers have been removed. Make sure that the codes on the back of the card haven’t been scratched off to reveal a PIN. Report any damaged cards to the store selling the cards.
  • Give the recipient your original receipt so they can verify the card’s purchase in case it is lost or stolen.

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