Why You Should Rethink Buying Gift Cards This Year

(Patrick Carlson)

Yeah, about that Borders gift card… (Patrick Carlson)

Giving people gift cards has many advantages: you can take a loved one out to dinner from hundreds or thousands of miles away, or you can buy someone new clothes or shoes without guessing at their size. However, gift cards and prepaid debit cards aren’t always the one-size-fits-all gift option that they seem to be, since they can have some serious drawbacks.

Our merry elf colleagues down the hall at Consumer Reports put together a list of reasons why you should reconsider giving gift cards this holiday season, and here we’ve combined their advice with some of our own.

People don’t want ’em. In a poll, only 37% of Americans said that they really want to receive gift cards this year. Me, I like gift cards, but that’s because I feel obligated to spend cash gifts on useful things, and a gift card to Sephora is, by definition, permission to go buy something frivolous. Maybe it depends on the retailer: a card to your favorite local sandwich shop is more personal than a card to, say, Subway or Walmart.

The funds aren’t protected. If a company goes out of business, you’re left with a nice scraper to remove frost from the outside of your car, and that’s about it. Readers holding KB Toys gift cards, for example, failed to notice that the company was going out of business, and lost their money. Your Borders, Circuit City, and Sharper Image cards? Useless. Also, if a store employee fails to activate a card correctly, you could be stuck with the blame, or at least in for an embarrassing gift-giving experience and a fight with Walmart.

They’re limited. Even if a company is still in business, do your research and make sure that a store is actually available where the recipient lives. Drugstores where I live sell AMC gift cards even though there isn’t an AMC movie theater within 150 miles, because gift card selections are standardized.

There are fees. This applies to prepaid debit cards more than store gift cards, but beware of loading fees for prepaid gift cards, and dormancy fees on all types of cards.

No dispute protection. Credit cards and many debit cards offer you extra warranty protection and the right to dispute a charge within two months if something goes wrong with your purchase. Gift cards do not.

Why gift cards shouldn’t top your holiday shopping list [Consumer Reports]