The Best Gift Cards to Buy

Here's an MSN Money piece on the differences in various types of gift cards. The article can be summarized with the opening:

Cards sold directly by retailers don't have fees and are less likely to have expiration dates. Before you buy a card that can be used more widely, check the fine print.

And a few of the more important points in the piece:

The distinction between cards with fees and expiration dates and those without them depends on the issuer. The retailers' gift cards -- known as closed-loop cards because they can be used only at that retailer -- carry no fees. Of the cards Bankrate surveyed, only Bloomingdale's and Macy's cards had expiration dates.

Cards that can be used in many places -- known as open-loop cards -- have fees and include expiration dates, after which monthly deductions are made until the balance is zero. The open-loop cards are from American Express, Discover, MasterCard, Visa and the six largest operators of shopping malls.

Though these open-loop gift cards cost from $2.95 to $6.95 to purchase and have expiration restrictions, they can be used like credit cards.

So here's the summary of the two types of cards:

1. Cards purchased directly from retailers don't have fees and most don't expire. But the can only be used at that retailer's stores.

2. Open-loop cards can be used anywhere a credit card is accepted, but have fees (and fairly high ones -- imagine paying $2.95 or more for a $20 gift card -- ouch!) and expiration dates.

We give a lot of gift cards every year and have NEVER used an open-loop card. We buy cards from Meijer (a local superstore) for people living in our area and from Target for people in other states. We figure everyone can find something they like from either of these places and there's no cost or expiration on the cards. Works for us.

How about you? What sort of cards do you use and from what stores?

Comments

[plonkee]

Over here we have book tokens. These can be redeemed in any book shop, and don't have any fees or expiry dates. These are the only gift cards that I buy really. Everyone likes books, and if they don't, they should.

[NCN]

I dislike store-branded gift cards -
Why? Well, who spends EXACTLY 50 bucks? You either spend a little more or a little less - either way, the store wins. You spend a little less, you forget about the 1.07 on your card, and the store profits. You spend more, well, the store now has the original 50 PLUS wht 2.08 you spent.
The only exceptions would be gas cards, where you can usually hit the number on the head.
NCN

[Honest Dollar]

Maybe people don't ever spend the full amount on the cards, but it might be worth it. There was a study (maybe a few studies?) that showed people are notoriously bad at buying gifts. What a giver pays or values for a gift is usually significantly higher than what the recipient values it. The exception is gift cards, where giver and recipients both value the gift cards pretty much at face value.

So if I had a choice between buying a $50 sweater that would be treated like it's $30, or buying a gift card that is redeemed for $48.93 (with the $1.07 going unredeemed), I'd go for the gift card. It's much more socially acceptible now (no longer a sign that you didn't put any thought into your gift) and classier than asking someone outright what they want for Christmas. (Actually, I don't believe this last part. My friends and I always just ask each other exactly what to get. It works out well for us, but not for others.)

[Michael B. Rubin]

As NCN stated, the store makes out pretty well with gift cards - certainly much better than with the old paper gift certificates. Back then, if you spent $48.93 of your $50 gift certificate, most retailers would give you $1.07 change. Now, of course, they don't have to, they give you the card back with $1.07 on it. Not too much for sale for $1.07 is there?

Still, receiving a gift card (or giving one) is usually a big time saver compared to returning the item you didn't want (and then you find out how much the other person spent anyway.)

[Chris]

If I get a $50 dollar gift card at Target, I will find something for myself for around that amount, maybe $48 dollars. Then eventually I will probably go shopping at Target again, even if it isn't for a gift for myself, so I just use the extra $2 then.

I've done it before - if you have $1.73 left on a gift card, they will take $1.73 off the purchase and you can pay the rest with a card, just like if you spent a little more than the original $50 to begin with. Like FMF said, no expiration or fees make it pretty easy to hang on to a card for a little while without losing anything on it.

I don't see what the big deal about having a little left on a card is. Keep track of it just like any other money. I never get $1.50 back in change and then throw it away because I can't buy anything for exactly $1.50.

[John]

I have an AMEX Blue Cash card, so I can really only speak for it. That said, American Express is currently offering "fee-free" AMEX gift cards to its members as of Dec 12th, 2007.