U.S. Markets closed

Gift Cards: Not So Lame Anymore

Christine DiGangi

Gift cards have become an increasingly popular and acceptable holiday gift, and shoppers are planning to spend more this year on these little plastic presents than ever before.

There are a lot of reasons for that, starting with the idea that holiday sales will be slightly higher than they were last year, according to the National Retail Federation. The NRF forecasts holiday sales will grow by 3.9% in 2013. In its holiday shopping survey, the NRF determined the average consumer will spend $163.16 on gift cards, a 4% increase from last year.

But the shift in gift-card spending is more than a shift in spending — it was accompanied by a change in attitude.

“For some years, gift cards were kind of a strange gift to give, a strange gift to accept,” says Trae Bodge, senior editor of RetailMeNot.com’s Real Deal blog. “People knew how much others spent on them, and gift cards were considered an impersonal alternative to time spent on thoughtful shopping.” Then the economy tanked, Bodge says. “People lost the ability to shop for themselves. Gift cards gave them permission to do so.”

A RetailMeNot survey from last holiday season found 86% of Americans would be excited to receive a gift card. The NRF’s survey from this year said 60% would like to get gift cards, and it’s the seventh year in a row gift cards have been among the NRF’s list of the most desired gifts.

“Gift cards have become the preferred choice during the past few years,” says Nimish Thakkar, founder of comparison shopping site DontSpendMore.com. “They are versatile instruments that allow the recipient to invest in a present that would be more suitable to her or his immediate needs.”

Popular, But Still Problematic

In many consumers’ eyes, gift cards have transitioned from an impersonal shopping shortcut to an opportunity to treat yourself to a favorite store or restaurant. (Department store and restaurant gift cards are the most commonly purchased around the holidays, according to the NRF survey.)

“What I think is interesting about gift cards is they are popular, but a lot of people don’t use them,” Bodge said. It’s a common catch: Consumers get cards for their favorite stores but forget to bring them out shopping or don’t remember they have them in their wallets. Sometimes people receive cards to stores they don’t frequent, and that money sits unused.

In that situation, technology helps. A handful of gift card exchange services have popped up, on which people can sell or trade unwanted gift cards — you lose some value of the card, but it may be worth it to get cash or a card you’ll actually use. Some of Bodge’s favorites for buying and organizing include Gift Card Rescue, Plastic Jungle and Gyft.

Even so, it can be a pain to deal with a gift card for a store you don’t like. Some like to give prepaid debit cards as an alternative to gift cards, but they’re not the same thing. Prepaid cards can come with many fees, and the purchaser often has to pay to activate the card. They’re certainly a useful tool, but it’s important the gift giver and receiver understand how prepaid cards work.

If a gift card sounds like a good idea, but you’re not sure which retailer to choose, there are some general options that will likely be well-received.

“Quite often you feel this pressure to give someone the right gift,” Bodge said. “You know they love to shop, but unless you’re really sure what they like, go with a big box store.”

More from Credit.com