Gift cards. The little plastic store-branded ‘I-can’t-think-of-a-real-gift’ way to say ‘I spent money on you’. Going to a store and giving them money so that you can give someone else a little plastic card for the same amount of money, but restricting the use of that money to a single store.
And who thought up the rechargeable gift card? I get a gift card, use it up, and they want me to give them MORE money IN ADVANCE so they can sell me something in the future. Is there really anyone that uses this?? It boggles the mind.
The idea that a company can sell a product or service in the future is a very attractive. The company takes your money, and promises to someday give you something of value in exchange. Phone cards were the precursors to most of the gift card craze. People purchased phone minutes at a pre-set rate which was usually a little lower than the predominant rate. The phone-card company bought blocks of minutes from the larger phone carriers (at a discount) and passed on some of the deal to the end user. Nice case of win-win.
Today however, the companies have gotten wiser to the situation and are cutting out the middleman altogether. Offering someone a service or product later for a payment now can float a profit margin up where it would normally not be. Money comes into the company coffers, but no expenditures happen until someone uses the cards. It’s been turned into a win-possibly lose situation.
Gift-card use is on the rise. With Starbucks, Best-Buy, Barnes&Nobel, and even a large number of restaurants using branded gift cards, people are giving them as gifts more and more. Merchandise stores use them for return credit, rather than reimbursing people in cash. Giving the cards is a convenient way to get last-minute gifts, or gifts for that ‘hard to get for’ person, but there are a few hidden drawbacks to being the recipient of these cards.
Gift card drawbacks;
Money is locked up – Putting money on a gift card restricts it’s use to only those stores that accept the card. If you don’t care for any of the products at that store? Tough. Go pick your prize and deal with it. No choice. And just TRY getting cash back for the balance on the card.
Card is Lost/Never Used – This is the merchant’s ultimate dream. The gift card is purchased, given, then the receiver NEVER USES IT. I still have some gift cards with balances on them from years ago.
Time Cost of Money – As time goes on, the value of money is eroded by rising prices and inflation. Your money is tied up on the card, not earning any interest, and slowly losing it’s value. The longer you leave it on, the less it will be worth when you finally use it. Use it! Now! Not tomorrow! Now, Now, NOW!!. What are you waiting for!! Go, Go, GOOOO!
Small Balances on Cards – Another slightly insidious plot is the small remaining balance ploy. The situation occurs when you’ve used the balance on the card down to a couple of dollars. You have one of two choices 1) Look HARD to find something REALLY CLOSE in price to what’s remaining, or 2) Buy what you want, use the remaining small balance, then PAY THE DIFFERENCE. Either way, the company makes more money off of you than they are truly entitled to. How many out there have bought something you don’t want or need just to get the remaining balance off the card?
The short answer is, if you can’t think of something to give someone, just admit it and send them cash. Moolah, Cold hard simoleons. Dosh, whatever you want to call it. Do yourself and your recipient a favor and stay away from the hassle of today’s gift cards.
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