Why Gift Cards Could Be the Worst Holiday Gift You Can Give

Holly Johnson

December 14, 2018  •  4 Minute Read

Financial Tips, Holidays

The holidays are a time when we dig deep to come up with the perfect gifts for the people we love. We often search online for hours to find a present that’s both practical and impressive — often blowing our budgets in the process. Some of the most eager shoppers even go to great lengths to make their gifts as personal as possible, either through carefully crafting a gift on their own or professional engraving or embossing.

And our love of gift-giving shows. The National Retail Federation (NRF) predicts that, during the 2018 holiday spending season, consumers could spend a total of $720.89 billion on holiday gifts. This figure represents up to a 4.89 percent increase over the year before, and it’s a whole lot of cash.

With so much thought and money poured into the holiday spending season, it’s easy to wonder why we still give our dear family members and friends gift cards each year. When you really think about it, gift cards are easily the most generic gift you can give!

Still, gift cards do have their benefits — at least for the gift-giver. They’re easy to purchase since you can buy them online or in-stores in almost any denomination. Plus, you don’t need to put much thought into the gift other than figuring out which retailer or restaurant to purchase from.

Finally, many people purchase gift cards for the holidays in order to earn cash-back or travel rewards for each dollar they spend. After all, you can’t earn points with a credit card when you gift cash as a gift.

Why Gift Cards Could Be the Worst Gift on Earth

Before you rush out to stock up on gift cards to dole out to family and friends, it’s important to remember that this gift option is typically appreciated less than the cash equivalent. Here are five reasons gift cards could be the worst gifts ever:

#1: You’re giving the equivalent of cash, but with fewer ways to spend.

No matter how much a family member or friend loves a specific retailer or restaurant, you’re drastically limiting their gift options if you give them a gift card to their favorite place. A Bed Bath & Beyond gift card is only good for dishes, towels, and home décor, for example, but what if the recipient would really prefer hiking gear or a dinner out with friends?

Since the concept behind giving gift cards is that they let people select what they want, why limit them to shopping or dining in one place? If you gave your friends and family members cash instead, they could spend it however they wanted.

#2: Billions in gift card balances go unredeemed each year.

If you need proof that gift cards are less than ideal, look no further than the recent statistics from CEB TowerGroup. According to the advisory group, consumers spend approximately $130 billion dollars on gift cards each year and roughly $1 billion in balances go unspent.

If you like the idea of never knowing whether your gift was enjoyed or totally forgotten about, gift cards are an excellent choice.

#3: They’re easy to lose or forget.

It’s hard to say why so many gift card balances go unspent, but it’s probably safe to say that a certain number of cards are probably just lost or entirely forgotten about. After all, what do you do with a gift card you receive anyway? You can stick it in your wallet or keep it in a drawer at home, but any option makes it far too easy to forget your gift card exists.

Cash, on the other hand, is considerably more likely to be spent.

#4: You’re enticing the recipient to spend their own money.

While it’s likely your loved ones appreciate receiving any gift including gift cards, it might be on the rude side to give gift cards to people who are struggling with money. Why? Because it’s far too easy for consumers to be tempted to spend their own cash when they go to redeem.

Imagine you give someone a $25 gift card to Macy’s or Kohl’s for a moment. The recipient can’t seem to find anything that falls under $25, so they opt to spend $50 or even $75 to get an item they want. All of a sudden, your $25 “gift” turns into a $25 or $50 bill for the recipient.

#5: Your loved ones may need cash the most.

As a final thought, don’t forget that many people you know could be struggling this holiday season. While they might enjoy a thoughtful trinket you pick up, a gift card for a retailer or restaurant may serve as a painful reminder of what they need most — cash.

It’s hard to enjoy cashing in an Applebee’s gift card when your light bill has gone unpaid or you are weeks behind on your rent, after all. With cash, on the other hand, you give someone the option to use their gift how they want — even if it’s for bills or food for the fridge.

If you need proof that some people need the money more than a gift card, check out websites like GiftCardGranny.com and CardPool.com. Both websites feature hundreds of deals every day since they let consumers sell gift cards at a discount so they can get their hands on cash instead.

The Bottom Line

If you plan on keeping your shopping simple this year, don’t forget just how generic — and wasteful — gift cards can be. Not only do billions in gift card balances go unredeemed each year, but you could be putting the recipient in a position to have to spend their own money or sell their gift card for less than you paid.

If you insist on giving gift cards in lieu of cash, considering gifting generic Visa or Mastercard gift cards at the very least. You usually need to pay a fee for these cards (usually between $3.95 and $5.95), but they can give your loved one a lot more options since they can be used anywhere Visa or Mastercard are accepted.