Gift Cards: What's New, What's Hot, What To Avoid

Just in time for the holiday shopping season, David Greene talks to Bankrate.com's Janna Herron about gift card options.

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DAVID GREENE, HOST:

Like it or not, we are now in holiday shopping season. And for gift givers who are simply stumped about what to get that special or not so special someone, there is always the gift card. They might be derided as impersonal, but Americans spend billions and billions of dollars on gift cards.

To help us sort through the array of gift cards, and also to give us some warnings about fees we might find, we called up Janna Herron. She writes about gift cards for Bankrate.com.

Janna, welcome to the program.

JANNA HERRON: Hi, thanks for having me.

GREENE: You recently wrote an article that really dug into a lot of these different gift cards. I mean, surveying 55 different cards. And as I understand it, Shell, Exxon, what can I get using a gift card from an oil company?

HERRON: Well, you can pay for gas. You can also go into the gas station and get, you know whatever they sell, like gum or a soda or a coffee.

GREENE: If I'm on the road, I'm running out of food and I need a snack, I can use the gift card from my aunt or uncle.

HERRON: That's right.

(LAUGHTER)

GREENE: And there is something we should talk about though, some of the hidden fees that we're seeing with these gift cards. They're not worth quite as much as you think they are when you get that $50 card.

HERRON: That's true. We found that all of the eight general-purpose gift cards - those are the ones with the MasterCard or American Express logos on them...

GREENE: As opposed to just a specific retailer.

HERRON: That's right. All of those have purchase fees ranging from $3 to $6. So not only are you spending the $25 to get the $25 gift card, but on top of that you have to add the $3 to $6. Most of the store-branded gift cards don't have a purchase fee. So that's the front end. And then if you look on the back end, your recipient might end up paying what we call inactivity fees, where they will charge you a monthly fee if you're not using your gift card.

GREENE: Oh, so the card, if it goes one month after another, it gets worth less and less.

HERRON: That's right, after 12 months. And it has to be after 12 months under federal law, so you do have a year. But then the gift card issuer can start charging you two bucks, you know, every month and then all of a sudden your $25 gift card is down to, you know, $17.

GREENE: Hmm. But if I start seeing my card go from $25 to $17, isn't one option to reload some cards and put money back into it?

HERRON: Yeah. Some gift cards do come with a reloadable feature. That works for the kind of gift cards where you will use it often small transactions, like when you go to Starbucks and you buy a latte and you go - say you go three times a week and you don't want to bring cash with you, you don't want to put it on a debit or credit card, then maybe you'll pull out your Starbucks card.

GREENE: Who is doing the reloading? Is it me or is it Uncle Harry who bought me the card?

HERRON: It would be you.

GREENE: OK. It's just not part of the gift.

HERRON: I mean, right. If Uncle Harry wants to reload he's going to have to give you the cash to do it.

(LAUGHTER)

GREENE: Which would be fine.

HERRON: Yeah.

GREENE: And just so we're clear, do people usually use all the value in their gift cards, or is there sometimes, you know, they just sit there and there's value left over?

HERRON: There's a lot of talk about unused funds on gift cards and it has gotten a lot better. Six years ago, consumers didn't get 10 percent of their gift card funds because they were either lost to fees or they expired, or they just didn't use them. Today, that percentage is less than 2 percent.

GREENE: And Janna Herron, I got a tweet from someone who said of gift cards: Love them. Love to get them. Can pick out what I want and the giver can rest assured that I'll like it. Is that what most people think of it or do some people feel that it's kind of an impersonal gift?

HERRON: You know, I'm sure they're a lot of people who think it's impersonal. I know that my niece and my nephew love gift cards and they're easy to send, and they don't have to wait in line to return something that I sent them that either didn't fit or they didn't like, and it is the number one most requested item for six years in a row, according to a National Retail Federation survey. So it's hard to go wrong, but you can. The best thing to do is to make sure you know where your recipient likes to shop. And if you don't, then you might want to consider the general-purpose cards.

GREENE: Number one most requested item - that more people are saying gift cards than anything else.

HERRON: That's right. It's amazing.

GREENE: Amazing. Jenna Herron, happy holiday shopping.

HERRON: Thank you. You too.

GREENE: Thanks for joining us. She's an analyst at Bankrate.com.

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