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November 27, 2006

What's that giant flushing sound? Over $8 billion of gift-card money purchased this year that will never be used

Tiptoptiptop

The headline of Ron Lieber's "Green Thumb: Growing Your Money" column about gift cards, in last Saturday's (November 25, 2006) Wall Street Journal, read,

"The Gift That Keeps On Taking"

I never dreamed that of all the publications on our blue planet, the Wall Street Journal would be the first mainstream media member to trash gift cards and unmask them to a wide audience as the enormous fraud they are.

I especially liked the final four sentences of Lieber's essay, which read: "Some retailers won't replace lost cards and advise users to treat them like cash. Since they see it that way, why not just give the real thing instead? Research firm TowerGroup figures that nearly $8 billion of gift-card money will ultimately end up unused this year. That generally doesn't happen with green cash money."

Precisely.

As I have contended here for years.

The newspaper piece follows.

    The Gift That Keeps On Taking

    Gift Cards Stay Popular, but Some Recipients Get Only Headaches

    One of the most popular gifts in America still leaves a lot to be desired. The National Retail Federation expects shoppers to buy close to $25 billion in gift cards this holiday season, even though both state legislators and federal regulators have put the cards' fees and fine print under the microscope recently. In August, the federal Office of the Comptroller of the Currency told banks that they should disclose their terms and conditions in a way that both giver and getter could clearly understand. A handful of states, meanwhile, have passed laws creating their own gift-card rules.

    The two main issuers of these cards would prefer that you didn't view them as consumer-unfriendly. Banks and credit-card companies push one type, those with Visa, MasterCard, American Express or Discover logos on them. Recipients can use the plastic at merchants that accept that card. Retailers' cards, meanwhile, give enthusiasts the run of a store.

    The bank cards have the biggest drawbacks. Almost all levy purchase fees of a few dollars and charge other fees if the recipient doesn't use them up within six to 12 months. There might be shipping fees, card-replacement fees and others, too. Washington Mutual Inc. charges purchase fees above $5 a card, and some of its cards levy maintenance fees of $2.50 a month after six months. A bank spokeswoman says it believes its cards are priced competitively.

    Banks do need some fee income. Unlike retailers, they don't make much profit on the goods that are bought with the gift card. But the insults never seem to cease: You may have trouble using the cards at gas stations and restaurants, and many retailers won't let you use both a card with a small balance (to drain it) and another form of payment to pay for a single purchase. Is it possible that givers just aren't aware of the trouble these cards can create for the supposed beneficiaries? Gift cards from retailers are better but not perfect. Both Kmart and Toys "R" Us have done away with expiration dates, maintenance or inactivity fees this year. Amazon.com, American Eagle Outfitters, Blockbuster, Bloomingdale's and Macy's still hit users with them. Company representatives note that most people drain their cards quickly and thus lose no value.

    So why charge these fees at all? Some states require companies to transfer unused monies into state unclaimed-property accounts. The cost of tracking funds and then following the rules necessitates a fee, according to a spokeswoman for Claire's, a chain of accessory stores for young women. (Retailing scofflaws could keep the leftovers themselves and hope states won't catch them.)

    If you are handing out gift cards this holiday season, it is rude to do so without warning recipients about the pitfalls. Remind them about any fees. Also, hand over the original receipt and write the card number on it. The recipient will need it if the card is ever lost or stolen and he or she wants a replacement. Some retailers won't replace lost cards and advise users to treat them like cash.

    Since they see it that way, why not just give the real thing instead? Research firm TowerGroup figures that nearly $8 billion of gift-card money will ultimately end up unused this year. That generally doesn't happen with green cash money.

....................

The online version (but not the paper one) of the story was accompanied by a link to a very informative graphic detailing the fine print on over 50 different individual cards.

If you insist on giving them, at least you'll be able to keep your losses to a minimum.

This one, though,

2tuyttr6ut

remains the gold standard.

November 27, 2006 at 02:01 PM | Permalink


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Comments

Hmmm...Actual size, front AND back! A nice sharp X-ACTO knife, a ruler, a glue stick -- the world is our oyster! Then after a while, we could all go take a fifteen-year crash course in cranking out license plates in sunny Leavenworth someplace. Anybody in?

Posted by: Flautist | Nov 28, 2006 3:16:34 PM

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