Gift Cards

Now for my enlightening discussion of gift cards. (I’m sure DW is rolling her eyes even as I type this… Oh yes, she’s that good, she can see what I’m typing)

The gift card argument in our house always starts with a disagreement about the so-called “breakage” fees. Those are the fees that start to crop up after you’ve used the card once, but didn’t use the whole thing and haven’t used up the remaining balance within some period of time.

DW: That’s MY money; I’m entitled to use it as I see fit when I see fit. It’s evil an evil Corporate America plot for them to screw me out of my money.

HappyDad: They are a retailer, not a bank. They want you to spend your money, not store it. Their purpose in issuing gift cards is to get you to spend money at their store; the breakage fee is there to motivate you to use the money on the card since the retailer does not get to recognize the revenue from your card until you actually buy something with your gift card.

(In fact, the actual accounting for gift card income is still up in the air to an extent.)

While we disagree on the motivations, we do agree on the solution: let the market forces do their work. This is not an area for government regulation (as much as members of Congress want to appear consumer-friendly).

The correct answer is to let the market work. As publicity and bad PR spread about companies that charge breakage fees abounds, then those companies will get the hint and drop their onerous policies. Just because the company has a right to do something, doesn’t mean it’s a good idea.

In recent years, both Home Depot and Toys ‘R’ Us are large-market, big-box retailers that have dropped their fees and expiration dates largely in response to the bad publicity they were receiving.

If you do get a card with one of these fees, then spend the whole thing at once. If you don’t like what you bought, sell it on ebay for cash.

One word of caution… Don’t spend your money buying a Visa or MasterCard gift card that some banks and malls peddle. Those have hefty fees just to buy the card then add on monthly fees or annual fees just for kicks. Sure, they can be used anywhere, but so can cash (or travellers cheques if you’re concerned about safety). Cash costs nothing to give, and travellers cheques are usually going to be cheaper than the cards. They’re a bad buy; if enough people don’t buy them, then the fees will go away. Just watch.

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One Response to Gift Cards

  1. And then I’d say:

    I don’t care if they are retailers. They sold the gift card; they have the money. It’s not my problem if they can’t use it. From my perspective, I bought a product or service, and I should be able to use it.

    I need the money more than they do.

    Also, I’m not a communist, I just play one on TV.

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