3 Tips to Buying and Using Gift Cards This Holiday Season

Gift cards are my favorite gift to give and receive and, apparently, I’m not alone.  According to the National Retail Federation, gift cards are the most requested holiday gift. They’re never the wrong size, never the wrong color and I never have to return them.

Some people call them thoughtless or impersonal, but I think they’re great. Still, whether you’re shopping for gift cards for someone else or you’ve received one as a gift, there are some things you should know about them.

They Will Lose Value, Just Not Anytime Soon

Prior to August 22, 2010, gift cards could rapidly lose value if they weren’t redeemed quickly enough. A common complaint was that you were given a card with a value of $100, for example, but when you redeemed the card months later, it was worth only $87. The remaining amount had been chewed up in fees.

You don’t have to worry about that happening any longer, unless you really take your sweet time redeeming your gift card. The value of any gift card purchased this year must remain in tact for five years from the date it was purchased. The exception to that rule is if your card is not used for 12 consecutive months.

The above rules do not apply for prepaid debit cards, which are often given as a gift, or promotional gift cards given as a rebate for a large purchase.

Don’t Fall For Gift Card Scams

Unfortunately, scams are just as common during the holiday season as they are the rest of the year and gift cards are not immune. Don’t fall for these gift card scams:

The Trojan Horse Scam: If you buy the first card hanging on a rack at a store, there’s a chance a thief has already written down the number on the back of the card. The thief knows you’re not giving it away until December 25^th, so he waits a few days and calls the toll free number off the back of the card to verify the value of the card.

If the card has value, the thief can then use it online and drain it. You won’t find out until after the holidays, if you ever find out at all. You’ll reduce your exposure to this scam by only buying cards that are in plain sight of security cameras or a check out clerk.

The Bait and Switch: Buying gift cards on the secondary market has become very popular. Consumers get a card for a store they don’t care for and they’ll list the card on eBay, Craigslist or a gift card resale site like Plastic Jungle.

And while most auction and retail websites have some protections in place to deal with fraudulent transactions, some do not. Plastic Jungle, for example, guarantees the cards sold on their site and, of course, eBay has their seller rating system and other consumer protections as well.

Point being, if you want to buy a gift card that’s worth $100, you might want to purchase it directly from the retailer to reduce the chances of being defrauded, which dovetails nicely into my last tip.

You May Not Have to Pay Full Price

Buying discounted gift cards is an option if you’re one of the many shoppers who can’t stand paying full retail. There are a number of websites dedicated to buying and reselling unwanted gift cards.

You can normally save anywhere from 5% to 15% buying on the secondary market, depending on the card. As you can imagine, the more popular cards offer less of a discount, while less popular cards offer a much larger discount.

This cuts both ways. If you receive a gift card that you don’t want, don’t just let it sit around in your dresser drawer because it will eventually start to lose value. In many cases, you can sell it for at least 80% of its remaining value.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter.