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Help the economy: Spend those gift cards

By Ivan Penn, Times Staff Writer
Published February 23, 2008

So it appears The Consumer's Edge has a reputation for being against gift cards.

Reader Tessa Greenwood sent me an e-mail about a week ago, noting, "I've seen your articles about gift cards around the Holidays and know you are not a huge fan of the popular cards..." .

Well, it's not that I am against gift cards altogether. One of the major problems, as Consumer Reports found, is too many gift cards sit unused in our wallets and dresser drawers: at least 10 percent of the nearly $100-billion spent on gift cards annually (so as much as $10-billion or so).

Add in the billions that have gone unspent over the past few years and we have a sizable chunk of change going wasted. (In the interest of full disclosure, I had a gift card given to me that sat in my wallet for several weeks. I used it a week ago).

The popularity of gift cards and the all-too-often lack of use of them comes at a time when our economy is limping along like a wounded soldier. It could use some help.

Our nation's leaders want consumers to go shopping. To spur us along, Americans soon will benefit from a $152-billion "stimulus package" with tax rebate checks of up to $600 per working individual and $1,200 per married couple. Families get another $300 per child.

I love the name of the package: the "Recovery Rebates and Economic Stimulus for the American People Act of 2008." It's a plan the nation will fund with borrowed money.

So we're borrowing (from the Chinese) to give to consumers in hopes of stimulating our economy by getting everyone to buy products (many of which were made in China).

In a recent survey, the National Retail Federation, a retail association based in Washington, D.C., found that consumers will spend about $43-billion of the stimulus money by shopping.

Yet consumers with gift cards in their wallets already are sitting on billions. It would seem the first part of the economic stimulus plan should have been to convince the American people to spend those gift cards - money no one needed to borrow.

If you think about it, the money on the unused gift cards has been spent, only it's not reflected in our economy. Retailers cannot count the money on gift cards as revenue until consumers actually use them. The money is stuck in limbo (but generating interest for businesses) because no products have actually been purchased.

So Ms. Greenwood pointed out to me that "there is a huge potential boon for the economy if people spend their cards." I agree.I believe the little pieces of plastic provide a great benefit over the old paper gift certificates, which could get wet, torn or like a child's homework, eaten by the dog.

And gift cards are really convenient. With our busy schedules, we don't have to take time to find a gift for our loved one or friend. We can pick up a gift card at Wal-Mart, CVS or Publix while we're shopping for our dinner, a prescription or something.

So here's the edge:

- Beware of hidden fees. Last year, Florida banned fees tied to most gift cards. Bank gift cards (the ones with the VISA logo, for example) are an exception. Banks are regulated by the federal government so state rules do not apply.

- Use the card's full value. If necessary, you can always request a "split transaction," which means the cashier will use the entire value of the gift card first, and any amount due beyond the card's value can be satisfied with another form of payment.

On its way
What consumers plan to do with their tax rebates:
- $43-billion for shopping
- $40-billion to pay down debt
- $19.8-billion for savings
- $4.6-billion for medical bills
- $4.4-billion for investing
Source: National Retail Federation

Ivan Penn can be reached at ipenn@sptimes.com or (727) 892-2332.

[Last modified February 22, 2008, 22:30:12]