Financial Education

Playing your cards right: The 2008 guide to gift cards

By Karen Von Der Bruegge, Chief Marketing Officer for Pioneer Services, a Division of MidCountry Bank

In recent years, gift cards have become incredibly popular—the National Retail Federation (NRF) listed more than $26 billion in gift cards sales in 2007. While the NRF expects sales to drop in 2008, due to the economic downturn, it estimates that consumers will still purchase nearly $25 billion in gift cards this holiday season.

Gift cards are often a practical choice for military families, since service members find themselves far from friends and families, and may not have much time to visit the mall. With their ease of use, ease to ship (they can easily be put into a greeting card or letter, thus saving money), and ability to get them for nearly anything and use them nearly anywhere, gift cards can be the gift of choice for the service member on your list.

There are a few things to consider, however, since some have fees and conditions that you may not realize until it's too late.

What to check for

Purchase fees—These are added onto the amount of the card when initially purchased. Usually factored as a percentage of the card's total value, some may also have a flat fee. This type of fee is also usually associated with bank-issued cards (such as a Visa or MasterCard); an NRF study found that 92 percent of retailers do not charge a purchase fee.

Service and maintenance fees—These are typically charged each month the card is not fully redeemed. This will be done automatically and the recipient will likely not know it until he or she goes to make a purchase, only to find the amount is less than anticipated.

Replacement fees—If the card is lost or stolen, some issuers may charge a fee for replacement.

Expiration date—Frequent moves, deployments, and just busy schedules can make it hard for a military family to use a gift card immediately. Even civilians often wait, with nearly 25 percent of gift cards not used within a year of purchase. So always check to see if (or when) the card expires, and let the recipient know.

Online considerations
Buying an "online" gift card can seem like a good choice—the buyer need not leave home to buy one, it requires no shipping, and can be used no matter where the recipient lives as long as he or she has an Internet connection. But this does not mean it's without risks.

The safest bet when buying an online gift card is to do so with companies that have proven track records. While there are many sites that seem legitimate—and some that may have even been around a few years—there is no guarantee that they will be up and running next year, or even next week. By choosing a retailer that you're familiar with and that has proven itself stable, you can be assured that the gift card won't become useless.

Also, if possible, choose a retailer that also has actual storefront locations. This makes it much easier for the recipient to make returns if the item is faulty, and also gives an avenue for resolving disputes if they arise.

Economic stability considerations
With the economy officially in a recession and businesses seeing declining sales figures, some companies may not be around for long. And if you give someone a gift card from one of these companies, they'll be out of luck once the business closes.

Before you buy a card from a company, do a bit of research to check on its strength. Stock prices have fallen across the board, so they may not be a good indicator. Instead, look at things like earnings, what industry analysts are projecting for sales and growth, and overall position in its market. If you stick with a strong company, there should be no worries.

Enjoy shopping
Taking these tips into account should help you get the most for your gift card dollar. And as a bonus, you get to enjoy an easy and enjoyable shopping experience, while whomever you give the gift card to gets what he or she truly wanted, making for happier holidays for everyone involved.

About the author
Karen Von Der Bruegge is the Chief Marketing Officer for Pioneer Services, the Military Banking Division of MidCountry Bank, a company that provides financial services and education exclusively to the military community. She is both a Certified Credit Report Reviewer and Identity Theft Prevention Specialist, has managed award-winning marketing campaigns, and serves on the board of USA Cares, a non-profit that assists military families.

More Articles