Did you get a gift card for Christmas? If so, you are in good company. Last year over $46 billion was spent on gift cards, according to MarketResearch.com
For businesses, gift cards are a good source of profits. The business gets the money when the card is sold, but the card may not be spent for months or in some cases never. Research by the National Retail Federation also shows that most of us spend more money than the face value on the card, resulting in higher sales.
Examining our mindset when it comes to using a gift card helps us understand how it affects our spending habits. An interesting phenomenon occurs when people think about spending a gift certificate or card. According to the retail association, people are 2.5 times more likely to purchase an item at full price when paying for it with a gift card. Like spending with credit cards, a gift card doesn’t feel quite like spending cash, and we are more likely to overspend. Think of the card as cash and you’ll be less likely to overspend.
Though these cards have become one of the “go to” presents for gift giving, market research shows that about 24 percent of the cards were kept by the buyers for their own use. Regardless of who purchased the gift card, if it is in your possession, it is time to plan for spending it. Use these hints to avoid any problems in redeeming your gift cards.
Redeem your card quickly. In 2015, more than $1 billion of gift cards were not redeemed, according to Consumer Reports. In fact, nearly one-third of cards are never redeemed, according to the nonprofit consumer organization. The worst thing you can do is drop it in the drawer and forget it. Carry the cards with you so you’ll have ready access when you get to the store. In addition, some cards have dormancy fees, an automatic reduction based on the time elapsed since the card’s purchase. The lesson is to spend it quickly, before you forget it exists or fees erode the value of the card.
Know the rules on your card. Besides the time limits on cards, there are other fees that may apply. Fees can be applied for the number of transactions or balance inquiry. Make sure you understand what rules you must follow in redeeming a card. Know the terms and conditions that apply to the card.
Some cards allow you to register your card in case it is lost. Again, check the rules and requirements on your card. If the issuer of your card has a policy of replacement, make sure you register it on the company website in case of loss or theft.
Spend all the money on the card. For most of us, this isn’t a challenge. According to Investopedia, when people redeem their cards, half of them will spend more than the card is worth. The financial website reports that consumers spend 20 percent more on average than the face value of their card.
If you end up with small amounts on your gift certificates, consider consolidating your cards. Cardpool.com or Cardcash.com offer cash money or a new card from Amazon that holds the consolidated value for your cards. The companies offer up to 92 percent of the face value for your cards. I worked the website with an imaginary $25 certificate from Fred Meyer and was offered $22.80, or about 92 percent. Other cards may come in at a lower rate, so again be sure to check for the specific card you have.
What if the card isn’t your favorite retailer or simply not going to be used? Get rid of it. Sell it to one of the above websites or regift it to someone who will use it. At least if you won’t use it, someone can get some good out of it.
Gift cards have become one of the most popular holiday gifts. If you received one this holiday season, be sure to use it before either you forget it or fees eat up the value of the card.