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For those of us rushing to do our last minute holiday shopping, gift cards may look like the perfect solution. The recipient gets to select exactly the right item in exactly the right size. Quick, convenient and no returns. It’s no surprise that they are the No. 1 gift choice in America.

Unfortunately, however, gift cards may not be as good as they look at first glance. I just finished reading the book, Why We Make Mistakes, by Joseph T. Hallinan. In it, Mr. Hallinan contends that on average U.S. consumers have between three and four unused gift cards apiece lying around the house. He continues to say that Americans lost about $8 billion annually by not redeeming gift cards. Of course, the retailers who sell the cards know this and make buying them ever more attractive.

Retailers hope that the gift card recipient will purchase an item more expensive than the value of the gift card bringing them increased revenue (65% of the card recipients do exactly that). If instead the recipient of the gift card makes a purchase for a lesser amount, the last remaining about may get trapped on the card since some retailers won’t let you “split” a purchase by using the remaining portion of the gift card along with paying the balance with a credit card or check.

Of course there is also the possibility that the store could go out of business before the recipient gets around to using the card. In fact, according to TowerGroup, a research organization, an estimated $100 million value in gift cards vanished with the bankruptcies of Sharper Image, Linen ‘n Things and other retailers..

Some companies have restrictions when using the gift cards. American Airlines, for example, will allow the recipient to use the card only when making reservations by phone, and can not be used when booking through a travel agent or at airport ticket counts. CVS won’t let you use their gift cards online and require that they be redeemed in person.

Some cards in some states impose expiration dates as early as six months from the date of purchase. Some new consumer protections will be put into place next summer by the Federal Reserve. One change, for example, will eliminate expiration dates for five years and prohibit companies from charging inactivity or service fees during the first year. As it stands now though some cards can lose all of their value through maintenance fees and inactivity.

If you’re trying to give the recipient more choice by giving a general purpose gift card instead of one associated with a particular store, keep in mind that the credit card company may impose additional charges such as a monthly charge for inactivity, service fees, lost card fees, or even charge a fee for checking a balance.

If, after all these warnings, you still want to give a gift card, the Consumer Federation of American offers these guidelines:
  • Keep a record of the card's information. Make a copy of the front and back of each card and keeping the information in a secure place and include the issuer’s toll-free number if it’s not printed on the card. Some issuers will replace a lost, stolen or damaged card if you can provide this information

  • Spend it fast. Your best bet is to use the cards as soon as possible. Add any expiration dates to your calendar so you don't forget to use a card.

  • Keep track of your balances. The Consumer Federation recommends buying cards only from issuers that allow you to check your balances online or by phone (some allow you to check only when you're at a store).

  • Use your card at a store that allows split payments. Large chains typically let you split your payment between a gift card and another payment method (cash, check, credit card, debit card). Ask first if you're in doubt.

  • Know whom to call. If you have a problem with a gift card, first contact the issuer for help. If you're not satisfied, you can report problems to the Federal Trade Commission at 1-877-FTC-HELP (877-382-4357), your state attorney general's office or the Office of the Comptroller of the Currency's Consumer Assistance Group at 1-800-613-6743 or customer.assistance@occ.treas.gov.
But, who wants to turn a well-intentioned holiday gift into an interaction with the FTC? The best advice, whether you give or receive a gift card, is to use it quickly.

When all is said and done, it might be easier to find another gift. One that you know will be received even if it might not be liked quite as much.

I’m eager to hear what tips readers can add.

Judi Martindale, (www.judimartindale.com), a certified financial planner as well as a certified coach and author, was named as one of American's top 250 financial planners for three years in a row by Worth magazine. She specializes in working with women's concerns all over the country.