Gift card issues are so frustrating.  I chose the restaurant for lunch with a friend based upon a languishing gift card that needed purging from my wallet.  When I tried to pay the bill, the restaurant manager said the gift card wasn’t activated.  A red-faced cash scramble ensued.  I didn’t have the gift card receipt.  I could have gone back to the selling merchant making demands and creating a ruckus.  Maybe the money would be refunded as a courtesy.  No thanks.  Equally bothersome was that I’d purchased another gift card at the same time.  So I probably stiffed a second business as well.  Recall The Money Skinny™ mission is to save you time and money.   Let’s dive deeper into gift card issues to decide if you want to risk your hard earned cash purchasing gift cards.

Gift Card Issues – Lack of Activation

A second issue with gift cards happens when merchandise is returned for a refund or a service is cancelled.  The merchant refunds the payment to the original payment source.  In other words, the credit is applied to a gift card that is long gone.  Who knew the relationship with a gift card was never-ending?  Like the missing receipt in the restaurant example, I can only safely discard the gift card receipt at some point in the distant future.  After the food is eaten or the navy slacks have been worn.  No one wants to accumulate more receipt minutiae.  Another hassle.

About two billion gift cards were purchased last year in the U.S., according to consulting firm A.T. Kearney, with the typical value of $50.  That brings up a third gift card issue which is the spend-up.  Suppose I have a $50 store gift card.  That card nags because the merchant has the money but I don’t have the merchandise.  It’s a to-do list item.  Pushing spending and consuming.  The spend-up occurs when buying things not really needed.  Just to use the gift card.  It’s a preemptive move to avoid a card with a miniscule residual balance that repeats the cycle.  Prompting another merchant visit.  Worse yet is when an item is available less expensively through another source.  But paying more for that item to burn through a gift card.  That hurts.

New card-industry rules make merchants liable for fraud-related losses.  As a result, some stores require cash payments for gift card purchases. Higher denomination cards are also less available.  These rules are designed to address losses that merchants incur.  What about the money consumers lose due to unredeemed gift cards?  If a personal check is gifted, the giver has the money until the recipient cashes the check.  With a gift card, who has and keeps the giver’s money when the recipient loses or discards the gift card?

The Federal Trade Commision offers these Tips for Buying and Using Gift Cards.  The Money Skinny™ advice is to redeem gift cards as soon as possible.  When a local business went out of business, my daughter’s $30 gift card was worthless.  Lower risk by using gift cards ahead of other payment sources.

The lack of gift card activation, the lingering consequences and the likelihood of spend-up has sounded the restaurant and store gift card death knoll for me.  I’ve stopped buying restaurant and store gift cards.  Instead of remediating gift card issues, I’m choosing prevention by no longer purchasing.  A Cash-Is-King philosophy.  Some nominal savings may be missed from a discount/coupon/reward.  I’m not choosing to invest my time and money there.  The risk of the gift card transaction going sideways negates the benefit.

• Understand the fine print of gift card redemption and how the process works.
• Realize the risks associated with gift cards and keep receipts.
• Cash-Is-King philosophy.