More people give the gift of choice

Like holiday shoppers everywhere, Ann Hatch has spent countless hours trying to find just the right presents for family members and friends. But too often her best efforts have failed, with recipients sometimes commenting that they didn't want the item or couldn't use it.

Exasperated, she now takes a different approach: She buys gift cards.

"Gift cards, in my house, have become a way of life – especially with a son in graduate school who has made them his preference for at least four or five years," says Ms. Hatch, a media relations director in Dallas. "It's really tough to guess, even with your own child, what she or he collects, owns, wants, or needs."

As shoppers make their holiday lists, retailers expect gift cards to be one of the most popular purchases. For the first time, cards will top toys, games, music, and movies as the gift of choice, according to a new American Express survey. Only apparel ranks slightly higher.

Two-thirds of consumers plan to purchase gift cards, according to a Deloitte & Touche survey. Gift-givers expect to buy an average of 4.6 cards, up from 3.9 last year. Those purchases could exceed the $18.3 billion consumers spent on holiday gift cards last year, according to the National Retail Federation. Yet 23 million Americans still have not used gift cards they received last year, Consumer Reports estimates. Some people have lost cards. Other cards have expired.

Options range widely. Some cards are good at specific stores, restaurants, and salons. Others can be spent anywhere in a mall. Still others, available through credit-card companies, can be used at any store and even online. A new entrant in the field, Giftscriptions, allows recipients to choose from among 50 magazines.

One fan of gift cards, April Masini, who writes the AskApril.com advice column, likes them in part because they are easy to buy. "You can purchase them online, and have them e-mailed or snail-mailed to the recipient – or to yourself, to wrap and present in person," she says.

Still, this one-size-fits-all gift has its disadvantages. "Recipients feel they're impersonal, or worse, recycled," Ms. Masini says. "And if you're sensitive about people knowing how much you spent, the gift card will tell the person exactly what you're giving them in terms of money."

Tim Ferriss, a guest lecturer on high-tech entrepreneurship at Princeton University, describes himself as a "frustrated consumer" on the subject. "Gift cards are convenient – for the person giving the gift," he says. "For the recipient, it's like cash with conditions."

Of the dozen or so cards he has received, he has only used one or two.

Many have come from stores he never patronizes. "In the rare cases that I liked the stores, I didn't need anything from them. Receiving a gift card, to me, doesn't show any more forethought than giving cash, and it's less flexible."

In cases like this, some recipients find a ready solution. "If you don't like a gift card ... someone gave you, pass it on as a recycled gift," Masini suggests. But Nan Andrews Amish takes a different view. "I do not re-gift cards," she says. "Some have expiration dates, which makes this tricky."

If Ms. Amish, a marketing consultant in the San Francisco Bay Area, does not shop at a particular store for herself, she might use the gift card to buy gifts for others.

Despite the generic appearance of gift cards, different restrictions and conditions apply. Although cards from individual stores and restaurants typically carry no purchasing fees, those from credit-card companies and malls often do.

"You do have to be aware that some companies' cards come with stipulations, such as monthly deductions from the amount if you activate the card and then don't spend the balance within the first year," Hatch says. She calls such fees and penalties "unfair, because the companies already have received the money and they simply are taking it away from you and making an extra profit themselves."

For Leah Ingram, an etiquette specialist in New Hope, Pa., cards are her favorite gift to give and to receive. But she offers a caveat. "My only complaint about gift cards involves the ones you buy from credit-card companies or for a mall. You have to pay a service charge to get one."

At American Express, buyers pay a $3.95 fee per gift card, plus shipping and delivery for cards purchased online. For MasterCard and Visa gift cards, fees vary, because they are set by the bank issuing the card.

Some recipients are surprised to find that they must pay a monthly fee after a certain period of time has elapsed. "We encourage our gift-card customers to make sure they fully understand what fees may or may not be associated with these cards," says Ron Hynes, vice president of prepaid services at MasterCard.

Gift cards tied to credit cards can sometimes be replaced if they are lost or stolen, although a service fee may be imposed.

"If you have registered the card, there is the ability to replace it," Mr. Hynes says. "If you have not registered, there may not be a way. In the same way, if I drop $20 out of my pocket, I have no one to go to to get my money back."

He advises users to read the terms and conditions as soon as they receive the card and check the expiration policy. Record the card number and the customer service telephone number, and keep the information in a safe place. Use the card promptly. Check the card balance before heading out to shop. Most cards offer a phone or Web option to do this. And keep the card even after spending the full amount, in case it is necessary to return merchandise.

Some fans of gift cards buy them for their own use. Steve Sultanoff of Irvine, Calif., a professor of psychology at Pepperdine University, eats out often and uses many restaurant gift cards. He is always on the alert for special offers for gift cards. Some promotions come from restaurant chains. He recently bought a $25 card with a $5 bonus added by the restaurant.

Various AM radio stations across the country also use gift cards as promotions, Mr. Sultanoff says. On one promotion for Outback Steakhouse, he bought a $50 gift card for $25. After adding several dollars for postage and handling, he says, "It comes out to be about a 45 percent discount."

Using gift cards to make online purchases can sometimes involve restrictions. As one example, Sultanoff discovered that Barnes & Noble would only accept one card for each online purchase. "If you have four $25 gift cards, you have to make four separate online purchases," he says. In such cases, he goes to a Barnes & Noble store and trades them in for a $100 card, then uses it online.

Although gift cards are available at discounts through online auctions, Sultanoff and others caution against buying this way because of possible scams. These gift cards are more likely to be counterfeit or obtained fraudulently.

For some employers, gift cards serve as a way to thank workers. Amish had a boss who offered gift cards at restaurants and bookstores as a reward for a job well done. "Most certificates were for $50, and they were pleasant surprises," she says.

Despite the popularity of gift cards, some stores find them a mixed advantage. Consumers who buy them spend less time shopping and make fewer impulse purchases, retailers say.

Even gift-card enthusiasts must often overcome initial hesitation. "When the trend first started, I thought that buying gift cards was impersonal and cold," Hatch says. But recipients' enthusiasm soon swayed her. To avoid that impersonal feeling, she will buy a small personal gift to include with a gift card.

For regular gift-card givers like Hatch, a card is also one of the best gifts to receive. "I love the convenience of 'plastic money' to use whenever I like," she says. "It's really great after Christmas during the sales. You can purchase more for the money."

As she and others enjoy the ease of buying gift cards this season, some may find that those on their list take an equally relaxed approach to receiving them. According to American Express, more than two-thirds of gift-card purchasers do not expect to receive a traditional thank you note, call, or e-mail from the card's recipient.

Emily Post might not approve.