Gift Cards: Be Careful This Year

A recent survey reported that almost 60% of us would like to receive a gift card this year. OK, but hands up if you’re also fine with receiving cash.

Last year we bought around $27 billion of gift cards in North America and 95% of people bought at least one of them. But this year, we’re in a new economic reality and I want to make sure you’re really careful and think twice before buying them.

When you buy a gift card you’re paying the merchant real Canadian money. What you get in return is a piece of plastic or paper that’s nothing more than an I.O.U. That’s all it is, and you gotta hope they’re still in business when you, or the person you gave it to, want to use it.

When the retailer or restaurant goes bankrupt, your gift card is worthless. That’s a huge risk you’re taking. A year ago, who would every have predicted the Bombay Company would go bankrupt, or Circuit City, the parent company of Radio Shack, or Linens ‘N Things, to name just a few really big ones?

Sure, you’re safe with a bunch of retailers from Tim Horton to Wal Mart but better safe than sorry. This year, give them some real Canadian cash. It doesn’t go bad, has no fees or expiry date and it’s not impersonal – merchants have marketed that and it isn’t true at all. It’s safe and the same thing as a piece of plastic. But the cash is good forever. If you want, put a note in there that your financial adviser recommended staying away from gift cards in case the retailer goes under and that you care enough to do that.

If you’ve got a store credit or some gift cards around – use them up. Besides, more than 20% of gift cards, or around $8 billion, are never used! That’s a huge amount of wasted money!

And one more thing: If your church or non-profit group wants a cool fundraising idea to re-claim these unused gift cards, send me a quick note and I’ll give you a great idea.

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