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We want
gift cards and like to give them, but for some reason we
don’t always use them and wind up wasting billions of
dollars.
A recent
poll by Consumer Reports, for instance, found that
one-quarter of people who received a card as a holiday
gift last year still haven’t used it, and more than
half of those had two or more unredeemed cards.
We have
lots of excuses. We forgot about the card or lost it.
The store didn’t have any merchandise we wanted. Or
the retailer isn’t nearby, or we don’t like the
store.
This has
spawned an online secondary market where gift card
exchange sites, such as PlasticJungle.com, Cardpool.com,
MonsterGiftCard.com and GiftCardRescue.com, help
consumers buy and sell unwanted retail gift cards at a
discount. Sellers can get around 70 percent to 90
percent of the value of their cards. The more popular
the retailer, the higher the price.
“It at
least gives consumers the option to get something for an
unused gift card,” said Tod Marks, senior editor at
Consumer Reports. “It’s like life support for
unwanted gift cards.”
Of
course, one way to avoid unwanted or forgotten cards is
by giving cash or checks instead. It’s unlikely that
someone will fail to spend money that’s in their
wallet or deposited in the bank. Another benefit:
Shoppers tend to spend more at a store than the amount
on the gift card. Not so with cash.
But card
experts and consumer advocates cringe at my suggestion
of cash, saying bills are “gauche.” At least a gift
card to a favorite retailer, they say, makes it seem as
if you gave some thought to what the recipient would
want.
And
besides, some say, people want gift cards. They are the
No. 1 requested gift this season and are at the top of
most shopping lists, according to the National Retail
Federation.
Gift card
sales are expected to reach a record $100 billion this
year, up nearly 10 percent from the year before,
according to TowerGroup, a research and advisory firm.
About $2 billion of that, though, will be lost through
fees and expired, stolen or misplaced cards.
The
losses were much worse before federal protections kicked
in last year that, among other things, prevent cards
from expiring within the first five years.
Still, $2
billion is a lot of money to leave on the table. And if
we don’t use it, somebody else will.
Some
retailers recognize unredeemed cards as income after a
long period of inactivity. Starbucks Corp., for example,
reported $46.9 million in income from unredeemed cards
for the year ended in October.
And more
than a dozen states now recover funds on unredeemed
cards, similar to other unclaimed property, said Brian
Riley, senior research director at TowerGroup.
So if you
are going to give a gift card, make sure it’s from a
retailer that the recipient patronizes. Or if you’re
not sure, consider a general-purpose gift card that can
be used at any store, although you’ll pay a fee to buy
the card. American Express, for instance, offers such
cards for a $3.95 fee.
And if
you’re stuck after the holidays with cards you don’t
want, here’s some advice for getting rid of them:
DON’T
SPEND, INVEST: The most innovative use of unwanted gift
cards this season goes to GoalMine, which caters to
small investors by helping them set goals and begin
investing for as little as $25.
Between
Dec. 19 and the end of January, GoalMine is accepting
unwanted gift cards with values of $25 and up that will
be sold at PlasticJungle.com, a card exchange site.
Consumers decide whether to deposit the proceeds in an
FDIC-insured savings account or in a stock or bond
mutual fund.
As a
further incentive, GoalMine promises to redeem the first
card for 150 percent of its value. The card can’t be
worth more than $50.
GoalMine’s
general manager, Rimmy Malhorta, said the company
figured there were a lot of unredeemed cards that could
be put to good use. “Wouldn’t it be great instead of
letting Starbucks have that money or iTunes or
whoever,” he said, “you could make that money for
you and put it toward your kid’s college education,
your family home or a rainy-day fund?”
GIFT CARD
EXCHANGES: These middleman websites for consumers
wanting to buy, sell or swap cards have been growing.
PlasticJungle, one of the major players, bought and sold
cards worth about $18 million last year, three times the
amount of the year before, said Chief Executive Bruce
Bower. “We are having similar growth right now,” he
added.
Sites
deal in gift cards from hundreds of national retailers,
so you likely won’t be able to sell a gift card from a
local shop. Cards usually must have a value of $20 or
$25 still on them.
Sellers
send their cards to the exchange, which verifies the
value. They can get as much as 92 percent of the value
of the card, but that’s for the hottest retailers.
Buyers
can pick up cards at a discount of up to 35 percent,
although the saving is much less on popular cards.
Some
sites offer a money-back guarantee if a card’s value
turns out to be less than promised. That’s a big
advantage over trying to sell a card on your own through
Craigslist.
If
you’re going to buy or sell on one of the exchange
sites, check out more than one. CardHub.com has a gift
card exchange feature that aggregates card deals from
various sites.
Consumer
Reports’ Marks, who researched gift card exchanges
earlier this year, says no single site gave the best
deal every time.
“The
sites often had a different idea of the worth of the
same card,” he added. The gap between the best and
worst offers for a popular Whole Foods card, Marks said,
was 22 percent.
Before
buying or selling, read the terms, which also can vary
among the sites. And buyers should make sure the site
guarantees the cards it sells.
Also
buyers should beware of cards with a value that’s an
odd number — say, $63.45 — which could signal that
the card was given to a customer as a refund on a
purchase, said TowerGroup’s Riley. Refund cards, he
said, don’t have the same legal protections as gift
cards.
If in
doubt, he said, ask the site if the card is from a
refund.
Many of
the gift card complaints to Maryland’s attorney
general deal with the merchant going out of business.
When that happens, card owners generally stand in line
with all the other creditors and may get little or
nothing. Try to avoid this by buying cards from healthy
retailers.
You can
also set up an account with ScripSmart.com, which sends
out email alerts if a retailer appears headed for
bankruptcy. ScripSmart also offers a “nag me” alert
to remind you to use your gift card.
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