Gift Cards: Businesses Love 'Em Even More Than You

If you get a gift card, stores hope you never use it

By ARI ODZER and TODD WRIGHT

Updated 7:45 PM EDT, Tue, Dec 15, 2009

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They're as ubiquitous as Christmas trees, fake snow, and plastic menorahs at the mall: gift cards. Everyone loves 'em, whether you're buying them or receiving them as gifts.

Stores also love them, but not for the reason you might think. Millions of retail dollars go unspent because people forget to use the gift cards, which is quite the present for merchants, who don't have to cough up a dime in merchandise. More than $5 billion in gift cards will go unspent this year, according to The Tower Group, a consulting firm.

"Experience shows that 5-15 percent of gift card values are never redeemed. This fact can pay for your program by itself," reports Gift Card USA, a company aiming to set up gift card programs for stores that don't have them.

Gift cards are insanely popular, and why not? They're convenient, you don't even have to go to a particular store store anymore, you can peruse the selection at Publix, and they save you from the ever-so-gauche alternative of giving cash.

Stores know this dangerous tidbit of information and use it against you.

Gift cards also bring people into their stores, where they sometimes spend more than their cards are worth. Cha-ching.

"I had that experience at Tiffany's. I don't think there's anything at Tiffany's that costs 50 dollars," said Barbara Kahn, the dean of the University of Miami's School of Business Administration, who obviously has fallen for the gift card gag.

You see, it happens to the best of us.

But here are a few pointers to make sure the stores don't get over on you or your gift giver with gift cards. First, it's best to keep the gift cards in your wallet or purse. That way, even when you forget about the card, it will eventually reveal itself during the annual purse dump or new wallet exchange.

Some gift cards lose value over time and others expire completely. Better to spend them on something you want instead of giving the companies free money.

And for the gift givers, despite the inconvenience, it's always thoughtful to actually buy a real gift instead of the plastic. Or maybe not.

"There's an inherent disutility in gifting, " Kahn said. "You're trying to give something to someone else, but you don't really know what they actually want and the gift card concept solves the problem."