The most popular, and most forgotten, holiday gift

Gifts cards still rank as the most popular holiday gift, yet many are forgotten after the holiday season. And along with return fraud, retailers must deal with unused gift cards after the New Year.

Consumer Reports claims that $8 billion was wasted on gift cards last year. According to its annual survey, more than one in four recipients of gift cards failed to redeem them.

While many consumers might say they prefer receiving a gift card in their holiday stockings, The Consumer Reports study suggests that shopper behavior doesn't match the enthusiasm. Of the 27 percent who didn't redeem the full value of their cards last season, nearly a third indicated they "forgot about it," while 35 percent said they "have not found anything" they wanted to buy.

Nearly six in 10 said they simply didn't have the time to redeem the card.

Another downfall to gift cards is that some come with added fees, such as The Citadel mall's Visa gift card.

"We sell a Visa gift card product issued by U.S. Bank National Association, so our product while branded to the mall, can be used anywhere Visa debit cards are accepted, worldwide," said Diane Loschen, marketing manager. "And as such we are mandated by both federal and state laws established for gift cards. On our product, a monthly maintenance fee is deducted from the card beginning with month 13 and ultimately if not redeemed, the card would be automatically depleted of its funds."

Yet a survey by the National Retail Federation shows that gift cards are more popular than ever.

The fifth annual NRF Gift Card Survey, conducted by BIGresearch, found that gift card sales will total $26.3 billion this holiday season, compared to $24.8 billion during 2006. Additionally, the average consumer will spend more on gift cards than they did last year ($122.59 vs. $116.51).

NRF's top 10 tips for buying gift cards

1. While 92 percent of the nation's top retailers have no expiration dates or dormancy fees associated with gift cards, consumers should understand individual retailers' policies before purchasing gift cards.

2. Consumers should only buy gift cards from reputable retailers. Gift cards sold through online auction sites are more likely to be counterfeit or obtained through fraudulent means. Additionally, consumers should keep their original receipt with the value of the card they purchased in case there are any problems with the card when it is redeemed.

3. Consumers should be aware that there are big differences between store-issued and bank-issued gift cards. Card issuers such as VISA and MasterCard are more likely to expire and tack on annoying activation, maintenance, inactivity and transaction fees. In fact, some bank-issued gift cards even charge a fee for simply checking the balance.

4. Retailers do not count a gift card as a sale when it is purchased -- instead, they wait until the gift card is redeemed and merchandise is exchanged. As a result, some of the billions of dollars spent on gift cards this holiday may not show up in "holiday" sales, but instead as sales in January or February, when the gift card is redeemed.

5. Spend your gift card before the government takes the money away. Like bank accounts and other personal property, gift cards that go unused or unredeemed for more than a few years are often treated as "abandoned" property. This means that if personal property goes unclaimed for a certain period of time, the state has the right to take it into the state treasury. In fact, states make millions of dollars a year from these clauses. Consumers are encouraged to spend their gift cards within the first year of purchase so that they -- not the state where the gift card holder lives -- receive the full value.

6. Because of improved technology, some retailers are able to reissue a lost gift card if consumers have kept the original purchase receipt. Some retailers also encourage gift card recipients to register their card through the store's Web site, which enables them to check their balance online and receive a new card if they lose or misplace the original card.

7. Retailers are adding new features to gift cards, making them more personalized for the recipient. Many retailers are allowing consumers to design their own gift cards, adding personal messages and photos.

8. Another convenience factor is that many stores are able to carry gift cards at their check-out counters because today's gift cards are not active until scanned.

9. Most of today's gift cards differ from traditional gift certificates because they are "stored value" cards. When a consumer spends $25 from a $50 gift card, the card automatically updates the balance. This is more efficient than the retailer reissuing another gift certificate to the consumer for the balance.

10. Gift cards are a great way to let gift recipients choose what they want and it's an easy way to stick to a budget.

Joan Johnson covers retail for the Colorado Springs Business Journal.

Copyright 2007 Dolan Media Newswires
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