What Gives With Gift Cards?

With the days until Christmas dwindling, more and more of us will be drawn to the gift card. It's quick to purchase, doesn't require wrapping, allows the recipient to choose something he or she really likes, and is one-size-fits-all � no embarrassing bodily measurements required. That's definitely a compelling list of perks. But don't let the convenience blind you to its potential faults. Get the real scoop on the gift card and whether you should buy or stay away.

Is my gift card as good as cash?
Depends on how you look at it. If you give cash, there are absolutely no restrictions on how the recipient uses the money. With gift cards, however, there can be a whole host of restrictions listed in the fine print that can eat away at your initial investment, leaving your recipient with less than the full amount of the intended gift. Conscientious gift-giver that you are, you'll want to check the following:

• The date of expiration on the card. The clock typically starts ticking when the card is "activated" on the date of purchase. To give your gift recipient as much time as possible to use the card, you'll want to purchase it at the last minute. Who knew that procrastination could pay?
  
  
• If any maintenance charges or replacement fees will be charged. Some sneaky card sponsors will "tax" the recipient if they let the card lie around. Others will apply the use-it-or-lose-it rule. Make sure the recipient knows when the card expires.
  
  
• If it can be used for online purchases. Most merchants allow their store-sponsored gift cards to be used at their online site, but beware the generic cards (like American Express (NYSE: AXP)), which may not be honored online.
  
  
• If the card issuer charges shipping if you purchase the card online. Don't pay to ship a dinky piece of plastic; choose another retailer that will send a card for free.
  
  
• If there are limitations on the type of merchandise that may be purchased. Can your gift be used to purchase anything in the store? If not, the store's policy stinks.
  
  
• If the card's sponsor will issue a new card if the original is lost or stolen. Accidents happen. Find out how the gift card sponsor handles life's little curveballs. Some gift card issuers will actually make you pay a fee of $5 to $10 to get a replacement card. Be sure to pay for the gift card with a credit card so you have a paper trail.
  
  
• If the remaining card balance can be turned into cash. Retailers rack up profits from the odd remaindered amounts on gift cards. Make sure that instead of padding the store's profits, your gift recipient can get the full value out of the card.

With an estimated $8 billion (yes, with a "b") lost to consumers last year because of unclaimed gift cards, you'll want to give some serious thought to whether or not a gift card is the most thoughtful gift you can give. The bottom line? If the card comes with too many restrictions and potential pitfalls, you're better off giving your recipient cash or a check. After all, cash never expires.

This article is adapted from the Motley Fool Green Light Money Answers archive, which features more than 100 articles on personal-finance topics such as taxes, credit, and beginning investing, organized by subject and life stage. For access to this content — plus the current newsletter, back issues, members-only discussion boards, and advisor blogs — take a free 30-day trial today!

Fool contributor Elizabeth Brokamp is a licensed professional counselor who regularly talks money with her honey, Robert Brokamp, editor of The Motley Fool's Rule Your Retirement newsletter and co-advisor of Motley Fool Green Light. The Fool has a disclosure policy.

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