Note: This article has been corrected to note that most closed-loop retailer gift cards carry no activation fees.
Can’t think of anything to get your teenage niece or quirky father-in-law for the holidays? You might be leaning toward a gift card. It’s like giving them cash without actually giving them cash, right? And it feels more like a gift because it’s plastic with a fun picture on it?
You might be better off just writing them a check, an article from Consumer Reports suggests.
But why, you ask? After all, a clear majority of shoppers (62%) prefer gift cards over anything else, according to a National Retail Federation survey. And the average person buying gift cards for the holidays is going to plunk down $172 this year, according to another NRF survey. It’s the gift that fits everyone!
Unfortunately there are drawbacks:
Fees to buy. It’s easy to get sucked into the display at Target or CVS full of gift cards from every merchant under the sun. And if you stick to retailer gift cards—the kind you can only use at a particular store—there's generally no activation fee. But if you're leaning toward what's called an "open-loop" gift card that can be used almost anywhere, such as a
Fees if they sit around. Just because you give someone a gift card, it doesn’t mean they’re going to use it right away. And after 12 months of inactivity, issuers can start charging fees for every month the card isn’t used. Just ask Kristy Rebele, who recently found a $125 gift card from BR Guest—usable at a variety of New York restaurants—at the bottom of a pile of papers. “There was only $26 left, because after the first year they deducted $3 a month for administration,” says Rebele, who lives in Pelham, N.Y. “It’s so sad. It would have been a nice night out.” (About half of states prohibit issuers from charging dormancy fees at all or for several years, but the other half do not, so check out what happens in yours.)
Lost cards are like lost cash. If you give your niece an iTunes gift card and she misplaces it, it’s pretty much game over. Whereas if she loses that check you sent, you can always write another one.
They have fewer safeguards. If you purchase something with a credit card, you’re granted a variety of protections for faulty merchandise, an incorrect charge or fraud. This is not true of a gift card—so if your giftee buys an item that breaks or doesn’t perform as expected, the merchant might not refund her money, versus a credit card with return protection.
There’s no guarantee they’ll be spent. If you send someone a check, there’s a pretty good chance she’s going to cash it and use the money to buy something she wants. But send a gift card for a retailer where your father-in-law never shops? It might sit in his dresser drawer until it expires in five years.
So what’s an indecisive gift-giver to do? As it turns out, etiquette experts still think gift cards can be a winning idea—as long as you put a little thought into the purchase. “In some ways, they’re a happy medium between a cash gift, which can be very impersonal, and recognizing that you might not know exactly what they might want,” says Daniel Post Senning, author and spokesperson for the Emily Post Institute. For instance, giving your film buff friend a gift card to the local movie theater is far easier than trying to guess what he might like to see, or when he can see it.
Knowing all of this, if you can’t think of an alternative to a gift card for a friend or loved one, just make sure you personalize it a little. “Take the time to write a little note that somehow makes a connection,” Senning says. “Make mention of something that’s specific to the relationship, or to your intent behind the gift.”
After all, it’s the thought that counts, right?
