22 Things You Should Know About Gift Cards Before Giving Them as Gifts

Gift cards are easy. People like getting them and they eliminate the prospect of giving someone an item they have to pretend to like before quietly returning it later.

There is, however, a downside to giving gift cards. People forget to spend them and some may consider it a lazy gift. Before you give someone a gift card you should know all the facts.

Many retailers offer digital gift cards. That's great when you forgot to buy a gift, but it's not what consumers want. Three quarters (75%) of all gift cards sold are physical cards, according to data from National Gift Card.

While physical cards are more popular "55% of consumers surveyed report being interested in giving or receiving digital gift cards that can be added to a mobile app or digital wallet," according to Blackhawk Network’s State of Consumer Gift Card Preferences in 2018. That suggests that convenience may eventually make digital options more popular as long as they're integrated into a shopping method people already use.

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Consumers will buy electronic gift cards for personal use if incentivized to do so. "The majority (78%) of respondents reported they would purchase an egift for self-use if it were offered at a discount," accordng to the Blackhawk study.

Gift cards have consistently been the most-popular gift given, according to the National Retail Federation (NRF). That dominance has gone on for 13 years where gift cards were asked for on 59% of consumer wish lists followed by clothing and accessories (52%), books/movies/music/video games (35%), electronics (29%), home décor (24%), jewelry (23%), personal care or beauty items (21%), sporting goods (18%), and home improvement items (17%).

About half (49%) of consumers still prefer buying gift cards directly from the retailer or brand, according to Blackhawk. Gift cards can, of course, also be bought online, at third-party retailers, and even at many gas stations.

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Restaurant gifts cards have been the most popular purchase at 41%, according to a 2016 Blackhawk report. Those were followed by credit card gift cards (31%), department store gift cards (28%), coffee shop gift cards (21%), specialty clothing shoes, apparel, and accessories gift cards (19%), and entertainment/movies gift cards (19%).

It's logical to assume that people give gift cards for the December holidays more than they do any other time of year. The reality is that birthdays (67%) beat out the holidays (44%) as a gift card giving occasion, according to Blackhawk.

Gift cards can be a trap. Over half (59%) of those surveyed by Blackhawk admit they have overspent the value of a card.

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Starbucks (NASDAQ: SBUX) has generally widely outpaced the rest of the field when it comes to selling gift cards. The coffee chain had over $1 billion in unredeemed gift cards in 2017 and those numbers have likely increased since then.

Retailers sold about $130 billion in gift cards in 2015. About $1 billion of that goes unused. Eventually, that "breakage," (the amount not spent) becomes revenue for the company.

Shoppers purchase an average of 4.6 gift cards per holiday season, according to Blackhawk. Most Americans (82%) who consider themselves "primary gift-givers" plan to buy at least one gift card.

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Gift card sales actually dropped in 2008 then fell again in 2009. Since then, they have climbed every year, according to data from Statista. The market has roughly doubled in that time period from $87 billion in 2009 to $160 billion in 2018.

The global gift card market has shown no signs of slowing down. It is expected to reach $506 billion by 2025, according to data from Persistence Market Research.

Neiman Marcus was the first retailer to use plastic gift cards (instead of paper ones) but it did not advertise them, according to Smithsonian. "It was Blockbuster who first displayed the gift card in its stores (apparently due to rampant counterfeiting of their paper gift certificates)," the website reported.

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Starbucks created the first gift card that was meant to be reloaded in 2001, according to Smithsonian. The coffee giant has been a leader in evolving gift cards and letting customers leverage them for rewards.

When a retailer files for bankruptcy your gift card can become worthless. Sometimes retailers honor gift cards during going out of business sales but that's not always the case. As soon as you know a retailer is experiencing any trouble, spend your gift cards there and avoid buying any new ones.

Gift card rules vary by state but federal law requires that gift cards don't expire for at least five years. Retailers, however, can (in states that allow it) charge an inactivity fee after 12 months.

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There are a number of online markets where you can sell your unwanted gift cards. You may not get face value for them, but you will likely get a decent portion of the value back.

It's not common but sometimes warehouse clubs and other discounters offer gift cards at below face value. You may be able to buy $100 in cards for $75 or something similar. In addition, some retailers offer an added bonus when you buy cards over a certain value during the holiday season.

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Most people head to the mall (or other locations) to spend their gift cards quickly. In fact 90% of gift cards are redeemed within 60 days of being received, according to data from CEB TowerGroup.

Many retailers let you transfer the balance on a gift card onto their app or website. That makes it easier to remember to use your balance since it will be sitting their the next time you log in.

Got a gift card someplace you never plan to shop? You might be able to return it. Policies vary by store and you may pay a fee to make the return, but that's better than being stuck with a gift you don't want.

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Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool has a disclosure policy.