Gift cards © Tom Grill/Corbis

The Basics

How the gift card stole Christmas

Decried by many as impersonal, gift cards continue to lure last-minute holiday shoppers who are out of ideas or unable to find other things to buy.

By The Big Money

We've seen plenty of must-have holiday presents come and go over the years, but not one has proved its popularity like the gift card. In fact, for the past five years, the prepaid piece of plastic has been the top present under the tree.

This season, Americans will spend an estimated $87 billion on gift cards.

Despite the fact that economists agree it makes more sense to give someone a wad of cash, we have come to embrace the gift card, which can seem more personal and, of course, convenient.

Since when did giving that gift that's not actually a real gift become the norm? Not all that long ago, really. The history of the gift card is relatively short.

It's a descendant of the good, old-fashioned paper gift certificate, which was brought to the mass market by big department stores in the mid-1930s.

However, it was not until the mid-1990s that various retailers, including Blockbuster, Neiman Marcus and Kmart, began to move away from easily ripped or misplaced paper gift certificates. They traded them for shiny new wallet-sized cards -- which aren't valuable until activated -- that could be displayed on a store counter for customers to pick up. Retailers quickly adopted the digital card technology borrowed from prepaid phone cards once they saw the benefits of gift-card programs.

Among the incentives: Cardholders usually ended up spending much more than the value of the card and tend to buy full-price items.

Target, which introduced its first card in1999, has also become a leader in innovative designs. This year, the discount chain is offering gift cards that look like toys, as well as "GiftCoins" and a "GiftSticker."

As gift cards became ubiquitous around the turn of the century, the face of the cards became more elaborate.

Even though the gift card is already a pretty painless gift to give, retailers have been working hard to make them more attractive and accessible. Increasingly, "gift card malls" -- racks displaying an array from various retailers -- have been popping up in supermarkets and convenience stores. And, of course, shoppers can order both physical and virtual gift cards online.

For example, this holiday season, Apple is offering personalized digital iTunes gift cards via Facebook.

This article was reported by Caitlin McDevitt for The Big Money.

Published Dec. 21, 2009

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