Everything You Need to Know About Gift Cards This Holiday Season

A selection of gift cards in a store in New York
They're "the gift most everyone buys for the holidays," according to USA Today. This holiday season alone, nearly 81 percent of shoppers will buy at least one gift card -- totaling nearly $30 billion, according to the National Retail Federation.

The benefits of buying gift cards are clear: They make great last-minute gifts (in a way that seems more personal than cash) and they vastly reduce the odds of you getting someone something just don't want or will never use. In fact, the percentage of consumers who made a holiday return has plummeted over the past few years as gift card purchases rose, according to data from America's Research Group.

But if you're not careful, these gift cards could end up leaving you -- or your giftee -- with less money than you thought.

Hidden Fees and Dates

Recent changes to federal law have made gift cards even more consumer-friendly.

For example, gift cards must now remain valid for five years. This law has worked as intended -- the amount unused on gift cards now only totals 1 percent of total sales ... down from 6.4 percent just four years ago, according to CEB TowerGroup.

But this unused amount still totals more than $1 billion each year.

To make sure your gift card purchase (or receipt) isn't included among these sunk costs, here are some tips to remember whether you're on the giving or receiving end of a gift card this year.

If You Are Purchasing a Gift Card:

1. Stick to buying store-branded gift cards. Bankrate.com's annual Gift Card Survey uncovered that the major gift cards offered through banks and credit card companies (generic Visa (V) or American Express (AXP), for example) charged either purchase fees or maintenance/inactivity fees (or both). On the other hand, only a small handful of store-branded cards reviewed carried similar fees.

2. Send either an e-gift card or purchase the gift card in store. Many gift cards (even store-branded ones) carry purchase fees disguised as "delivery fees." For example, Toys R Us sells gift cards on their website that come with a $1.95 delivery fee -- or $4.50 if you want it delivered inside a personalized greeting card. These fees amount to almost 20 percent and as much as 45 percent on a $10 gift card.

3. Look for promotions to save money. Many retailers offer gift card promotions this time of year. Like a free $10 bonus card currently offered when you purchase a $50 Applebee's gift card. Or a recent Groupon (GRPN) deal at Starbucks (SBUX), selling a $10 gift card for just $5. Also, don't forget to check out gift card resellers like CardCash.com and GiftCardGranny.com, where you can buy unwanted gift cards for up to 35 percent and 65 percent off, respectively.

If You Receive a Gift Card:

1. Spend the gift card as quickly as possible. Obviously, you should give your purchase some thought. But even though gift cards have a five-year shelf life, the longer you hold on to it, the more likely you are to forget about it or misplace it.

2. If you aren't spending it within a month, verify the gift card's terms. Visit the store's (or bank's) website to determine what fees are attached -- and when they kick in. If their website isn't clear, call the number on the back of the card to verify. Then add a reminder to your calendar to use the card well in advance of those dates.

3. If at all possible, register the card. Most companies will replace lost or stolen gift cards. But the only way this is possible is if you register the card in your name. Some companies will charge a replacement fee for the inconvenience -- but even this is better than missing out on the balance entirely.

4. Spend the entire amount so you're not left with pennies. You might be likely to discard a card with a small amount on it, so try to use it up in full. If you have a bank or credit card gift card, one blogger at BrightBacon.com has a creative solution: Buy an Amazon.com gift card for the exact amount of the remaining balance and immediately apply it to your Amazon.com (AMZN) account. This way, you'll be able to apply this odd amount to the next purchase you make at the leading online e-tailer.

Motley Fool contributor Adam Wiederman has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, American Express, Starbucks, and Visa. The Motley Fool owns shares of Amazon.com, Starbucks, and Visa. Try any of our newsletter services free for 30 days.

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buy gift cards from retailers you trust and you'll be fine. gift cards are again the number one gift for christmas in the uk led by itunes, amazon, argos, debenhams, pizza express, h&m and asda - at thegiftcardcentre.co.uk we see a big increase this year in e-gift cards

December 18 2013 at 8:31 PM Report abuse +1 rate up rate down Reply

You can buy gift cards at Sams Club for less than the face value of the card!

December 17 2013 at 1:12 PM Report abuse +1 rate up rate down Reply

I have found that the retailers charge $6.95 for the cards, they charge tax on that fee as well. You are wasting $6.95 plus tax on your friend that is not being enjoyed by them. That is over $32.00 for a $25.00 gift. Just put $20.00 in an envelope and save yourself 12 dollars and let your friend pay the taxes...as they were going to have to pay taxes again when they went to redeem the gift card anyway (...and in some places they are charging a fee to redeem the cards, as well) Whoever thought of this money maker was a genius. Stop being taken by them!!!

December 17 2013 at 1:01 PM Report abuse rate up rate down Reply

The president was blamed by the repubs and other haters for high gas prices last year. Now the prices are down and dropping, I don't see any of them giving him any credit. Those devilish babylonians are a crack up...

December 17 2013 at 11:59 AM Report abuse rate up rate down Reply
2 replies to Mr.Vince's comment

He doesn't deserve any credit, he is ruining this country.

December 17 2013 at 12:12 PM Report abuse rate up rate down Reply
Ho Bo

what does that have to do with gift cards?

December 17 2013 at 2:15 PM Report abuse +1 rate up rate down Reply
Jonathan x

people should know they can use half gift card half cash if you want to use your left over.

December 17 2013 at 11:56 AM Report abuse rate up rate down Reply

NO ONE buys anything \"for the holidays.\" They buy for CHRISTMAS.

The liberals want to make Christmas the Lord Voldemort of holidays - \"The Name That Shall Not Be Uttered.\" But it\'s not \"the holidays\" or \"this holiday\", it\'s CHRISTMAS. It says so right on my calendar.

December 17 2013 at 11:54 AM Report abuse +3 rate up rate down Reply
2 replies to dash.flash's comment

Stop your liberal bashing. It's Christmas. But I guess you only pay lip service to christianity.

December 17 2013 at 12:05 PM Report abuse -1 rate up rate down Reply

Some people do give gifts during this time of year for events other than Christmas. For example some people give gifts for Hanukkah, some may take a hostess gift to a Thanksgiving celebration, a New Years Eve party, bowl game parties, or other holiday season parties that aren\'t religion based.

Do I care one bit about some complete stranger, like a store clerk, saying Happy Holidays rather than Merry Christmas? - no. That is because a complete stranger has no influence on what I believe or how I do or do not celebrate any holiday. I\'ve been around more than six decades have lived in small places and large metroplexes and there are just as many, if not more, Christian churches still in operation in every town in this country than when I grew up. In the small town where I live there are many nativity scenes in front of churches and even in local businesses. Is there one on the courthouse lawn? - no - and there shouldn\'t be.

In this country, you are free to follow your holiday traditions with your family iwithout any interference by liberals or the government or the store clerk who said Happy Holidays.

December 17 2013 at 12:16 PM Report abuse +3 rate up rate down Reply
1 reply to jteasdale's comment

...me thinks your comments are in the wrong discussion...this is about gift cards...

December 17 2013 at 1:12 PM Report abuse +2 rate up rate down

If you sign up for Obama care they give you free gift cards for a lobotomy

December 17 2013 at 11:47 AM Report abuse -2 rate up rate down Reply

Of course it always makes more sense to just give them the CASH instead. It still has it's draw backs with inflation, but it at least is still accepted anywhere. And there are times your loved ones could just use some extra cash, especially after the holidays.

December 17 2013 at 11:42 AM Report abuse rate up rate down Reply

My wife got a $25 A/E card and they charge $3.94 to use it.

December 17 2013 at 11:00 AM Report abuse rate up rate down Reply

The main problem with buying gift cards at a grocery store is that they usually charge a fee for those cards. I was going to buy a Home Depot card at Kroger and they were going to charge me $4.95 for it. I just drove the extra four miles and got the card at Home Depot. Unfortunately it's hard to get Visa, Mastercard, or American Express cards "free" because even the banks charge fees for those.

December 17 2013 at 10:32 AM Report abuse rate up rate down Reply
1 reply to pj512's comment

I buy gift cards at our local grocery store and have never had to pay a fee.I know there's a fee for the Visa and Mastercard giftcards,but that's why I never buy them.I refuse to pay almost $30 for a $25 giftcard!

December 17 2013 at 10:46 AM Report abuse rate up rate down Reply