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Americans are preparing for the holiday season -- the busiest spending season of the year -- and they are expected to spend $457.4 billion, according to the National Retail Federation. For years, apparel has been the No. 1 holiday gift. This year, though, the gift card is going to give that paisley tie or green sweater a run for the money.
According to the 2006 American Express Gift Card survey, 66% of shoppers plan to give a gift card this year, compared with 57% last year. (Apparel givers are holding steady at 68%.) Another holiday survey, by Deloitte & Touche, showed that consumers this year are buying more gift cards -- 4.6 cards per person compared with 3.9 last year. So whether you're on the giving end or the receiving, chances are there will be a gift card in your pile of holiday gifts. (Find out how to personalize your gift cards.)
For businesses, this means big bucks. Sales of open-loop gift cards (those from the major credit card companies that can be used anywhere the credit cards are accepted) are projected to reach $2.14 billion, up 60% since 2005, according to Tim Sloane, director of the Debit Advisory Service at Mercator Advisory Group. He expects closed-loop gift cards (those that can be used only at the retailer where they were purchased) to top out at $53.4 billion this year, a modest increase of 3% from the previous year.
A consumer-friendly credit product
Retail store gift cards continue to be a consumer-friendly credit product, with fees and expiration dates the exception rather than the rule. The retailers can make a profit from the merchandise users buy. (Check out a gift-card comparison chart.)Gift cards from the major credit card issuers, though, still carry an assortment of fees. All continue to charge monthly "maintenance" or "dormancy" fees, ranging from $2 per month to $3, if the gift card isn't used within a certain period of time. All but American Express (AXP, news, msgs) have expiration dates.
More from Bankrate.com and MSN Money
The study found that consumers want cards that can be used anywhere, and they'll pay for the privilege. Among other findings of the third annual Bankrate.com Gift Card Study:
- The maximum amount allowed on cards has increased in a number of cases, with Best Buy (BBY, news, msgs) topping the list: Gift cards purchased in stores have a limit of $9,999. J.C. Penney (JCP, news, msgs) has raised its maximum to $500 from $250.
- State laws prohibiting expiration dates have had some effect. Thirteen states have banned them, and although the laws apply only to local retailers, not national ones, some national issuers have voluntarily done away or loosened their card expiration policies.
Video on MSN Money: Gift cards
Think twice before buying a gift card for that hard to buy for person on your holiday shopping list. Find out why it's like burning money. Click here to play the video.
- More retailers are allowing gift cards to be used online. Both Lowe's (LOW, news, msgs) and Sears (SHLD, news, msgs) allow all gift cards to purchase merchandise online.
- Personalized cards are a new trend. Wal-Mart (WMT, news, msgs) allows customers to upload photographs to create their own cards, and American Express offers personalized gift cards on which the recipient's name can be embossed.
- AmEx gift cards can also be purchased in stores this year, whereas last year they were available only online. Target (TGT, news, msgs) and Bloomingdale's have added e-cards, which can be used online but not in stores. Of the electronic cards surveyed, only J.C. Penney allows the cards to be used to purchase merchandise in stores. The others -- Wal-Mart, Costco (COST, news, msgs), Target, Macy's, Bloomingdale's and Kohl's (KSS, news, msgs) -- allow electronic gift cards to be used only online or for catalog purchases.
- Some merchants have introduced new fees. Discover Card and Safeway (SWY, news, msgs) used to offer free shipping; now Discover charges $3.95 to $6.95, depending on packaging, and Safeway charges $2.50 for delivery.
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