Gift card is a gift we most like to get

Chances are the certain someone you’ve been racking your brain to find a gift for has a simple request: A gift card.

Surveys show consumers overwhelmingly want to receive gift cards this holiday season, while card sales continue to increase each year.

And the situation just got better for consumers: Congress improved consumer rights this summer by curbing non-use fees and expiration dates for gift cards.

Still, there are pitfalls.

“Most consumer advocates think gift cards are an opportunity for you to spend your money and your friend or relative not to get the full benefit of your gift,” said Ed Mierzwinski of U.S. PIRG, a federation of state Public Interest Research Groups.

Consumers lose billions of dollars a year in unredeemed, lost or expired cards.

A quarter of the people in a Consumer Reports survey last fall said they had not redeemed gift cards that were nearly a year old.

Still, the National Retail Federation’s latest shopper survey shows gift cards are a hot item, with 57 percent of consumers saying the cards top their wish lists, up from 55 percent in the past two years. Visa says its survey this summer of 1,005 adults showed 85 percent would “appreciate” a branded gift card — one with an American Express, Discover, MasterCard or Visa logo.

“It’s a lot of money that consumers spend on gift cards. The popularity has grown tremendously over the last 10 years,” said National Retail Federation spokeswoman Kathy Grannis. “Some people give them as single gifts” or routinely add them to traditional gifts.

About 77 percent of shoppers will buy at least one gift card this season, according to the NRF’s annual Intentions and Actions survey released last week.

It predicts spending will reach $24.78 billion and consumers will shell out $145 on gift cards this holiday season, up from $139 last year.

With more cards in circulation, chances increase that consumers will lose.

Businesses that issue cards can close, for example. In recent years, when Sharper Image and Linens n’ Things went bankrupt, consumers were left holding $100 million in gift card value.

Still, Mierzwinski advises, “If you must go with a gift card, go with a store card rather than a bank card. [Bank cards] tend to have the most fees that are still legal.”

The 2009 Credit CARD Act placed some limits on expiration dates and fees charged by some cards.

For the most part, major retailers already had eliminated expiration dates and fees for non-use, though smaller companies and branded, general gift cards still have the dates and fees.

BankRate.com and CreditCards.com, card comparison websites, surveyed 54 gift cards from major retailers and banks. Seven charged a purchase fee, all of them banks. Six issuers charged dormancy, or inactivity, fees after 12 months.

Here’s a rundown of the rules that took effect Aug. 22:

● Gift cards must remain valid for five years from the date of purchase, or the last time money was added to a reloadable card.

● Dormancy fees don’t kick in for 12 months. After a year of non-use, the issuer can charge one fee per month, but there’s no limit on the amount.

● Cards must come with a notice of any expiration date and fee policy. But an amendment to the law this summer allows companies to sell existing stocks of cards without explaining the new rules until the end of January, after the holiday shopping frenzy.

And, a couple of loopholes:

● The new rules don’t apply to store rebate cards and those issued as part of reward or loyalty programs. So, consumers who exchange credit card or airline points for a retailer or bank gift card might see quicker expiration dates.

● Some providers don’t give refunds if a card is stolen or lost, and some who do charge a replacement fee.

Gift cards are a great deal for retailers. About $5 billion in card value is never redeemed; a term the retail industry calls “breakage” or “spillage.” Consulting firm TowerGroup estimates the lost value is about 6 percent, down from 10 percent in 2007. That’s inventory and services that retailers and restaurants were paid for, but never had to provide.

On top of that, when consumers do use their gift cards, they typically spend 40 percent more than card value, said Daniel R. Horne, associate professor of marketing at Providence College in Rhode Island.

“Consumers think of it as a big discount,” said Horne. “They buy better and they buy more. When you’re spending someone else’s money, you tend to buy more freely and you’re treating yourself.”

But, whatever the problems, there will be a lot of cards in Christmas stockings this year. Ben Woolsey, marketing director for CreditCard.com, offers one last bit of advice.

“If you get one during the holidays, you can take advantage of post holiday sales and get more value,” he said.

“If you throw them in a drawer and forget about them, they certainly don’t get more valuable, and they generally get less valuable. It’s a good New Year’s resolution to use gift cards sooner than later.”

STAY SMART

Here’s how to be savvy about gift cards: