Money & Career

Why gift cards may not be such a great idea

They may be the easiest present, but to get the most bang for your gift card-giving buck, make sure you ask yourself these four questions before you buy

Caroline Cakebread

Santa’s sleigh could be getting a lot lighter according to a recent survey that tracked our gift-buying plans for 2010. This study found that nearly half of Canadians (49%) are planning to buy gift cards for Christmas gifts this year. Turns out we love them — and it’s not hard to see why. Plastic and portable, they’re a lot easier to lug around than, say, hockey sticks or bathrobes. You can get one for just about anything: coffee, gas, hotels, clothes…the list goes on. Even Visa and MasterCard issue prepaid cards that can be used like cash. And, of course, gift cards help avoid that awkward and disappointing moment when someone opens your present and it’s the wrong size/shape/colour/thing altogether.

But while they offer convenience and choice, there are a few reasons you should pause before buying gift cards. From hidden fees to stealth expiry dates, some cards could see you throwing money out the window in exchange for….well, nothing.

To get the most bang for your gift card-giving buck, make sure you ask yourself these four questions before you buy:

Are there fees?
Some gift cards – particularly pre-paid cards from credit card providers – involve an activation fee before you can use them. The Financial Consumer Agency points out that a card worth $50 with an activation fee of $4.95 is charging you 10 percent of the value of the card just to use it. At that point, you probably need to ask whether it’s worth it.

Are there more fees?
There could be other fees too – you can be charged if you want to check your balance, replace the card or load it with more money. Before buying, make sure there’s information on potential fees, terms and conditions for using the card before you buy. If none is available, walk away.

Will it expire?
Some provinces in Canada have prohibited expiry dates on gift cards but they’re still out there in some parts of the country. Make sure the card doesn’t have an expiry date – and if it does, make sure the balance can be transferred to a new card (and that there won’t be any additional charges to do this). And, when you give the card, make sure the recipient is aware of all this information – it would be pretty disappointing to try using a $50 card only to find that it’s expired (not to mention a big waste of money).

Should you get something else instead?

Sure, it’s great to give someone a shopping spree at their favourite store, but if the card’s worth $100 and the item they want tops out at $80, can they do anything with the balance? A lot of cards won’t give you cash back – they’ll only transfer the balance to another card. And if the balance won’t cover another purchase at the store, you’re basically giving the retailer money for nothing (unless the user decides to add more of their own money towards the purchase of a more expensive item). You might just be better off giving cash money or just buying them the gift you think they’ll like best (and getting a gift receipt).

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