Buying Prepaid Gift Cards on the Holidays

Prepaid holiday gift cards are intended to let gift recipients pick out what they want most from their favorite stores. If the gift buyer doesn't know the recipient well, or, if the recipient enjoys shopping, prepaid gift cards can be just right. But, as with all gifts, buyer beware. Gift givers should make an informed choice in holiday gift cards, so they don't end up giving a gift that turns out to be worthless.

Although most Americans report that they like receiving holiday gift cards, many of those cards remain unused after they are received. A Consumer Reports survey found that about 27% of Americans said they still haven't used holiday gift cards they received in the past year. Consulting firm TowerGroup estimates that consumers lose nearly $8 billion each year because of unredeemed, expired or lost gift cards. Before you get a prepaid gift card, you need to know if a holiday gift card is the right choice, and you need to know where to purchase the card that will have the best long-term value.

Choose Retail
Consider buying a holiday gift card at a retail store, rather than a bank or credit card issuer. Holiday gift cards from banks or credit card issuers may have strings attached, such as expiration dates, inactivity fees, activation fees or other restrictions. Most retailers, in contrast, have holiday gift cards with no expiration dates or fees, and they may offer discounts or incentives for using gift cards when making a purchase. Always take a moment to read the fine print because an educated consumer can make an educated choice.

Choose the Right Amount for the Retail Store
A $50 holiday gift card can be more useful at a bookstore, where a user can find a few inexpensive books or CDs, than at a large electronic store, where items typically cost hundreds more. A holiday gift card that will require the buyer to add hundreds of dollars of his own money has more of a chance of sitting unused than one that can be used to purchase an item or two.

Think of the Recipient
Although some stores offer e-cards that can be e-mailed as gifts, some people are not comfortable shopping online. In addition, e-cards may not be accepted at the physical store, and this could limit the user to a smaller online selection or shipping charges that eat up some of the value of the card.

Buy From Reliable Sources
Although it might be tempting to order gift cards online from auction Web sites, be aware that the card may be counterfeit or may have been fraudulently obtained. It may have undisclosed fees or an expiration date, or it may have less of a balance than the seller claims. Avoid trouble by purchasing a holiday gift card from a reliable source.

Buy From Large Companies
Many consumers were surprised and understandably angry when The Sharper Image stores filed Chapter 11, rendering gift cards to their store worthless. With many smaller mom-and-pop specialty stores especially vulnerable to bankruptcy, buyers of holiday gift cards would be wise to choose their sources carefully and look at the financial standing of the company selling the gift card.

Protect Yourself From Scammers
Some stores report that scammers have found a way to write down the numbers on the backs of holiday gift cards displayed on racks in retail stores, and when the cards are activated, they use the cards and deplete the balance before the user can use them, rendering the cards worthless to the recipient. To avoid this problem, buy holiday gift cards from behind-the-register sources, such as the Customer Service desk, or directly from the cashier. Always ask the cashier to scan the card, to be sure that the balance is there, before leaving the store.

Additional Buying Tips

• Always examine holiday gift cards before buying them, to be sure that a PIN number is not visible on the back and that the card has not been tampered with.
• Keep the Sales Receipt. If the card has been used fraudulently, it is possible to have the money refunded. Taking precautions can help thwart scammers.
• Check the Web site of the Federal Trade Commission (FTC) at www.ftc.gov for problems or complaints about holiday gift cards sold by retailers.

Holiday gift cards are one-size-fits-all, convenient ways to give gift recipients a chance to buy themselves something at a favorite store. With knowledge and foresight, the giver can make a holiday gift card a welcome and appreciated gift.