By Tom Flynn

Millions of people give and receive gift cards every holiday season. Often they are good gifts, in that they don’t require a lot of thought and are fairly convenient to buy. But perfect they aren’t. Here are seven reasons why you might want to rethink gift cards as the ideal present:

1. Impersonal: Nothing says expediency like a gift card from the big issuers – MasterCard, Visa, American Express and Discovery. The message many recipients receive is that the card was the least the sender could do, the very least. Did the sender visit a large store, pick up cards for 20 people and call it a day? If you are going to give a gift card, you might want to at least choose one that coincides with the recipient’s interests. For example, if the recipient is a golf nut, a gift card from a pro shop indicates some thought went into the choice.
2. Unequal: According to new data, there is a great deal of variation among gift cards when it comes to the value, features and happiness a card confers. The study ranks gift cards on a scale of 0 to 100, and the top spot is shared by McDonalds and Target at 83.34 points. Pulling up the rear is Hallmark’s gift card, at 16.67 points. For many gift-card givers, it becomes a question of Russian roulette when choosing a card, unless they do the extra work to check out surveys like the Lend EDU one. If you are going to give a gift card, it’s definitely worth the extra work.
3. Unwanted: In 2015, about $1 billion out of the $120 billion in gift cards given were never used. A billion dollars is not loose change – it represents a windfall to gift card issuers and a failure for gift card givers (and recipients). Fortunately, gift card exchanges such as CardPool.com and GiftCardGranny.com exist, at which you can sell your unwanted gift cards for cold hard cash. Once again, we are talking about extra work associated with gift cards, which is why they are often less than perfect gifts. Gift card exchanges allow you to go online and post your unwanted cards for sale at some discount to their face values. At some sites, the exchange purchases the card from you for a price it offers, and other sites act as intermediaries who provide a marketplace for buyers and sellers to bid prices. Naturally, gift card exchanges are a great place to buy gift cards at a discount. The Lend EDU survey lists the average percentage discount for buyers and average resale value for sellers of each card. Smart buyers who are going to give a number of gift cards this year can use the survey results to choose the best cards with highest average discounts. Unfortunately, many gift card recipients will simply not make the effort to sell their unwanted cards on an exchange, dooming the cards to expire in the back of some dusty drawer.
4. IOU: Issuers love to sell gift cards. You pay the value of the card plus the cost to purchase (often $4 to $5 per card for the big brands) right away, while the card issuer promises future value – an IOU. Until (and if) the card is redeemed, the issuer has the use of all that IOU money, earning interest on it to fund their business activities. Here’s a better idea. Send a check from an interest-bearing account, so that you get full benefit of the money until the check is cashed. Of course, giving cash is even more impersonal than giving a gift card.
5. Risk: It doesn’t happen that often, but the possibility exists that the gift card issuer will go bankrupt before their gift cards are fully redeemed. These cards are considered low-priority unsecured debt, meaning holders of the cards are unlikely to get even some of their money back. It’s true that Target is unlikely to go belly-up before its gift cards are used, but can you say the same about the gift cards from Joe’s Pizzeria? There is also the risk that you’ll lose the card – most issuers don’t reimburse for lost cards.
6. Spending: Let’s face it, a $20 gift card looks, well, cheap compared to a $20 gift. For one thing, recipients don’t usually dwell on a gift’s price, unless you give money (or a gift card) – they appreciate the thought that went into selecting and sending a “real” gift. To combat this perception, you might feel the pressure to give larger gift cards, say $50 instead of $20. So, you are out more money because of the relative perceptions about gift-card giving. Another advantage of giving gifts instead of cards is that gifts are often marked down for sale, but cards aren’t (except for the discounts at card exchanges).
7. Expiration: Some cards expire in as little as 12 months, unless you pay extra fees to keep them on life support. Nothing is more embarrassing than for a card recipient to be told at a posh restaurant that their gift card has expired. Now you are faced with paying another way (or washing dishes until 2 a.m.).

The bottom line: Gift cards can be useful, but they require extra work and lack creativity. If you do use them, make sure you understand the fees and the expiration policy.

LendEDU is a content partner of The Oxford Eagle providing news and commentary. This content is produced independently of The Oxford Eagle.