Fail-safe gift in the cards

"They are more specific to different stores. I started to use them more often because I feel I can kind of tailor them (to gift recipients). My brother-in-law loves Home Depot. That way he can have a gift card for Home Depot and get whatever he likes."

But while they are a popular holiday gift, consumers need to be aware that general use gift cards issued by credit card companies are likely to have fees that can take away from their value. All the more reason to read the fine print before making a purchase, say consumer advocates.

For the sixth year in a row, gift cards are expected to be the most popular gift both in the Bay Area and at the national level, according a 2009 holiday spending survey by Deloitte. Some 57 percent of Bay Area consumers plan to buy gift cards this holiday season, compared to 64 percent of consumers nationwide.

On average, Bay Area consumers will buy 4.4 gift cards with per-card spending averaging $37 during the 2009 holiday season, compared to an average of 5.8 cards and per-card spending of $26 in 2008. Nationally, consumers said they will buy 5.4 gift cards, with per-card spending averaging $35, compared to an average of 5.3 cards and

per-card spending of $28 in 2008.

Gift cards accounted for $24.9 billion in holiday spending last year, according to the National Retail Federation.

"It replaces sweaters," said Ellen Cannon, managing editor of www.bankrate.com, of the popularity of gift cards. "It's like a fail-safe gift."

Bankrate.com released a survey of retail gift cards offered by 22 of the country's largest retailers and four general purpose cards issued by American Express, Discover, MasterCard and Visa. None of the retail cards in the survey had purchase fees charged to the buyer or monthly inactivity fees subtracted from the card's value. That was not the case for the four general purpose cards, which are essentially debit cards issued by the major credit cards companies that can be used at a wide variety of merchants.

American Express, Discover, MasterCard and Visa each charge a $3.95 purchase fee to the gift card buyer, said the Bankrate.com survey. MasterCard and Visa also charge a $2.50 monthly inactivity if the card is not used for 12 months.

Many people are unaware of fees involved with general purpose gift cards, said a survey released in October by the Consumer Federation of America. Most buyers of gift cards go for retail cards. General purpose cards represent less than 10 percent of the market but it is growing segment, the survey said.

"Consumers clearly like the convenience and flexibility of gift cards but are also largely unaware of the their cost and risks," Stephen Brobeck, the Consumer Federation's executive director said in a statement. The non-profit group has released an online brochure about gift cards. To download it, check out www.consumerfed.org and go to the What's New at CFA link.

Despite the extra costs, consumers might want to consider a general purpose gift card if they don't know the recipient well or if the gift buyer likes going to different stores.

"Even though you are paying a fee for the card, you are paying for the freedom for them to use the card where they please," said Cannon.

Federal credit card legislation passed last year requires that consumers have at least five years to use any gift card before it expires and that 12 months of non-usage pass before any monthly inactivity fees can occur. Although industry compliance is not required until February 2010, most gift card providers are already following the law's requirements, said Cannon.

Before buying a retail gift card for use at a brick-and-mortar store, restaurant, movie theater or other establishment, make sure the business has a presence near where the gift recipient lives. That can be done by using the business locator feature on a retailer's Web site.

What gift card to buy is often a spontaneous decision.

Blackhawk Network operates Gift Card Mall displays at grocery stores, drug stores and other retailers nationwide. A subsidiary of Pleasanton-based Safeway, Blackhawk Network is the largest provider of third-party gift cards in the United States and Canada.

Half of the buyers at a Gift Card Mall display in a brick-and-mortar store have not decided ahead of time what type of gift card they will buy, said Teri Llach, Blackhawk's chief marketing officer.

"About 50 percent actually decide right there at the rack what card to get," she said.

During the holidays popular categories of gift cards include restaurants, apparel and electronics, she said.

"A lot of times at the end of the year fashion is extremely popular because the consumer gets the card in December and can use it in January when the sales hit," Llach said.

In addition to stores, gift cards are also sold online at www.giftcardmall.com but shipping fees apply. Consumers may be able to avoid shipping fees by going directly to the retailer's Web site.

Contact Eve Mitchell at 925-952-2690.

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