While gift cards continue to grow in popularity, they're far from a gift to your (and the recipient's) pocket book. Although they are an easy alternative for those hard-to-shop-for people on your gift lists, there are
far better ways to give money than with a gift card.
There are a number of different types of gift cards, but the one thing that they are all likely to have in common is a variety of fees. These fees will not only cost you for purchasing the card, but also the recipient depending on how the gift card is used. Here are some of the disadvantages and fees that you are likely to run into if you give or receive a gift card.
Gift Card Money Expires: If you are given a gift card, put it in a desk drawer and come across it a couple of years later, it's likely to be worthless. That is because many gift cards expire and once they do, your money disappears. If the gift card does allow a replacement of an expired card, the replacement card will likely carry a fee of $5 to $10.
Monthly Maintenance Fee: There a few states which have implemented laws stating that gift cards can't expire. Even if the gift card doesn't have an expiration date, that doesn't mean waiting will have no effect. Some gift cards charge a monthly maintenance fee if you still have a balance after a certain amount of time. This means that if the recipient doesn't use the gift card quickly, it can become a worthless gift. Anyone who receives a gift card should immediately check to see if the card comes with monthly maintenance fee. If it does, you'll want to use it promptly since the money was meant for you, not the gift card seller.
Shipping & Handling Fees: Many people find that purchasing a gift card online is convenient to order it. This convenience doesn't come cheap. Ordering a gift card online will likely result in a "shipping & handling fee" of anywhere from $5 - $10, more if you're ordering it last minute and it has to arrive in a hurry. If you want to avoid this fee, you need to go to a brick and mortar shop to make the purchase.
Service Fees: If you purchase a gift card by phone or over the Internet, you'll likely be charged a service fee from $4 - $12.
Limits On Use: While store specific gift cards are likely to have less fees that the general use gift cards, they can only be used at the specific store. Also be aware that some gift cards can't be used for Internet shopping further limiting their flexibility.
Out Of Luck If It's Lost Or Stolen: If you lose your gift card or it is stolen, you're most likely out of luck. Unlike credit cards that provide protection, gift cards don't. While some retailers are more lenient with this and will reissue the card if you can provide proof of your most recent purchase, most won't. If you are lucky and you can get the gift card replaced, there's a good chance you'll also be charged a replacement fee of up to $10. A gift card is, in most cases, the same as carrying cash with no protection.
Exchange Gift Card For Cash Fees: If the recipient can't find anything and decides to cash out the card, they will either be out of luck or pay a lot to do so. Many gift cards simply aren't redeemable for cash. Those that will let you redeem your remaining balance usually come with "processing fees" as high as $15.
ATM Fees: Some general use gift cards come with PIN numbers. If it does, you can likely withdraw money from the card at an ATM to get cash. While this is convenient, it certainly is not free. You can expect to pay about $2 per ATM transaction with a gift card if they are allowed.
All in all, gift cards make little financial sense for you or the gift recipient. If you are set on giving a gift card, opt for one from one of the few retailers that don't charge fees: Banana Republic, Barnes and Noble, Borders, J. Crew, Starbucks or The Gap.
Gift Card & Fees - Why Gift Cards Aren't A Good Present
