Why Gift Cards Make the Best Presents

They might seem impersonal, but research suggests gift cards make excellent gifts

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A young woman holds up a gift card.

Gift cards are more popular than ever this year – and with good reason. According to the National Retail Federation, the average shopper will spend $163 on gift cards this year, a 4 percent increase over last year. That’s a new record, and it brings the total gift card market to an estimated $29.8 billion.

But before you go out and complete your shopping list with a stack of wallet-sized pieces of plastic for everyone on your list, consider the potential downside. A report released this week from bankrate.com found that the cards people say they like best – general-purpose cards from American Express, Visa, Discover and MasterCard – are also the ones most likely to carry fees. Only one in 10 retailer-specific cards, on the other hand, carry such fees.

[Read: The Secrets to Snagging the Best Discounts.]

The bankrate.com survey, based on interviews with 1,001 adults in October as well as an examination of 63 popular gift cards in November, found that all general-purpose gift cards charge purchase fees. That means the people who buy them pay a fee, typically around $4 but as much as $6.95, to do so. Seven in 10 of those general-purpose cards also came with a maintenance or dormancy fee, which means funds are subtracted from the card if it is not used within one year. (None of the retailer or brand-specific cards charge such fees.)

Still, gift cards are popular for a reason. The bankrate.com survey also found that 53 percent of Americans prefer the general-purpose gift cards even though they come with fees. (It’s not clear if consumers always understand or know about those fees.) People who earn more than $75,000 a year are even more likely to prefer general-purpose gift cards, and higher earners are more likely to both give and receive gift cards.

The good news is that seven in 10 gift card issuers replace the card if it gets lost (the customer typically must first register the card for that benefit) and most can be delivered electronically as well as be reloaded. The most common amount put on gift cards is between $25 and $50.

[Read: 12 New Shopping Apps for the Best Deals.]

The National Retail Federation also points out that gift cards are increasingly accessible via mobile devices, which makes it easier to reload as well as track them. At Starbucks, for example, customers can pay for drinks directly with their mobile phone using the Starbucks app. And six in 10 people said they would like to receive gift cards this year, making it the most popular item on people’s wish lists for the seventh year in a row, NRF reports.

Department stores, restaurants, coffee shops, electronics stores and online retailers are among the most popular gift cards this season, NRF finds, and men tend to spend about $20 more on gift cards than women do ($171.35 versus $155.42). Most shoppers point to the fact that it allows people to select their own gifts as their reason for giving gift cards.

If gift cards are on your shopping list this season, be sure to follow these guidelines before making a purchase:

1. Make sure your recipient uses the card, or they’ll lose it. Once you give a gift, it’s out of your hands, but you might want to gently remind the person receiving the card that they should use it within a year, if it’s the type that starts charging fees for dormancy and maintenance after that point.

2. Register the card. If the retailer offers registration, you should take advantage of it, because that will offer extra protection in the event that the card is lost or stolen.

[See: 10 Ways Companies Annoy Customers.]

3. Pick a retailer the recipient likes. Instead of giving general-purpose cards, which are more likely to come with fees, consider buying a card at a specific brand or retailer, since those tend not to charge fees. Just be sure you pick the right kind of card for your recipient to increase the chances that they’ll use it.

4. Look for mobile apps. If your card comes from a retailer that also offers a companion app, you might have the option of uploading the gift card amount onto the app.

5. Read the fine print. Whenever you’re dealing with financial products, reading the fine print is always a good idea. That way you’ll avoid any surprise fees, from the purchase fee to the maintenance fee.