Gift cards seem to be the perfect present for many folks on our Christmas and end-of-year holiday buying lists. Nine in 10 Americans say a physical gift card is an appropriate gift, and we don’t have to worry about choosing the right size or color.
We Americans bought $304 billion (with a “b”) worth of gift cards last year, experts say. That figure will likely grow by about 12% this holiday season, according to the Capital One Shopping website. After all, most consumers like the simplicity of these gifts. Those little plastic cards are easy (and cheap) to wrap and ship if needed, and they allow recipients to buy whatever they want.
They seem to be a smart gift choice.
But here’s an amazing hidden aspect about gift cards — and it’s worth billions: we Americans don’t always spend the full value of the cards given to us.
More than 40% of American adults have unused gift cards, Capital One reports — and the total value of those unspent funds is greater than the annual budget of some states.
Maybe we lose a card, misplace it, or redeem only part of it. Perhaps we send one to a distant nephew or niece who doesn’t live near that store. And sometimes folks just get busy and never take the time to use their gift cards. One study says the average U.S. adult has about $70 in unspent or lost cards — though that sounds a bit high to me.
After the cash registers stop jingling and the holiday dust settles, we Americans have failed to redeem perhaps 6% of all gift cards sold, according to researchers. That’s $18 billion (again with a “b”) in unspent funds sitting on those forgotten pieces of plastic!
More than 40% of American adults have unused gift cards, Capital One reports — and the total value of those unspent funds is greater than the annual budget of some states.
So what happens to all that unspent money?
Small store owners (and huge corporations) love gift cards. They provide an interest-free loan — you spend money to buy a card in November, give it in December, and your recipient might use it in February or March… or never. The store gets the use of those funds for months. That’s one reason stores can afford to sell $50 in gift cards for $40 or $45 as a “special bargain.”
Another reason companies like gift cards: six in ten U.S. adults spend more than the card’s value when they redeem them. We often use our card gifts to cover most — but not all — of a special, bigger purchase.
My view about gift cards is pretty simple: I rarely value a gift card as highly as money I’ve actually earned. As longtime Dave Ramsey financial students, Sally and I “put a face and value on every single dollar” we handle. That way, we know where each one of those greenbacks goes — or at least we try to.
Gift cards are like cookies — enjoyable to consume, but since they’re unexpected, they feel different from earned money. We’ll obviously keep using them, because we Americans love convenience. But we’re only hurting ourselves if we don’t redeem them.
So celebrate Christmas, Kwanzaa, and Hanukkah this season — with or without gift cards — as we head toward a new year.
Come to think of it, where did I put those gift cards I got last Christmas?
