Gift Cards: No Longer Bad Presents

The rise in gift cards this year is largely because they have improved.

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Gift cards, once disdained as a last-resort present, are now almost as ubiquitous this season as the scent of scotch pine. Shoppers are expected to spend $35 billion on gift cards over the holidays, a 25 percent increase over last year and a doubling since 2004, according to Archstone Consulting.

The jump is partly because retailers have all but eliminated many of the former drawbacks of the cards, such as expiration dates, declining values, and fraud. Dave Sievers, consumer practice leader at Archstone, says most stores now use technology that adds the cash value of the card at the register. That prevents shoppers from coming home only to find that the value of their gift cards had already been used up by fraudsters.

Some retailers have even jazzed up the cards so they are almost a gift in themselves: One of Target's cards also functions as a wind-up flashlight, and Wal-Mart offers gift cards with different themes, including Barbie, Shrek, and baby showers.

"It used to be a gift you gave when you didn't know what to give someone. That's less true now," Sievers says. Now, he says, a gift card is desirable—good news for those of us who have already fulfilled much of our shopping list with the cards. (Sievers plans to give iTunes gift cards to his nieces and nephews, along with a few Gap cards for his nieces.)

If you're on the receiving end of a gift card this season and you find the store choice less than appealing, don't fret: It's also easier to redeem gift cards that you don't want. Websites, including Cardavenue and Plastic Jungle, have sprung up to address the fact that in the past, between 15 and 20 percent of gift cards went unused. (Sievers expects that percentage to decline this year.) The sites allow people to buy, sell, or exchange gift cards with each other, usually at a discount or for a fee.

All these improvements may seem to suggest a day when gift cards replace actual gifts altogether. But don't worry—Sievers expects growth in the gift card business to slow down over the next few years as the market grows more saturated. So you can still look forward to some three-dimensional presents under the tree in 2020.

Do you hate gift cards? Please feel free to vent in the Comments section below.