As millennials gain purchasing power, gift cards rise in popularity

  • Kara Driscoll
  • Staff Writer
Updated Dec 29, 2017
Richard B. Levine/Newscom
A selection of gift cards in a store on March 8, 2016 in New York. (Richard B. Levine/Levine Roberts/Newscom/Zuma Press/TNS)

The holiday shopping rush isn’t over just yet. Local shopping centers and malls will see an influx in shoppers who are cashing in on gift cards and certificates they received over the holiday season, but a lot of them will go unused.

About 59 percent of consumers planned to buy gift cards or certificates as presents for someone else, according to the National Retail Federation. As millennials gain major purchasing power, it means gift cards will rise in popularity even more, the trade group found.

“As Gen Z and Millennials gets older, their purchasing power increases, and the rise in disposable income is sure to be seen by retailers,” said Matthew Shay, NRF president and CEO.

Holiday shoppers planned to purchase an average of four gift cards with an average value of $45 per card, the second most-popular gift after clothing. However, nearly $1 billion in gift cards go unused each year, according to CEB TowerGroup.

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Spending on gift cards was expected to reach $27.6 billion, up from last year’s estimated $27.5 billion.

Rachel Terry went out shopping the day after Christmas at some of her favorite stores including Rue21, Old Navy and Toys “R” Us.

“We’re just spending the gift cards we got for Christmas,” she said.

The most popular gift cards include those for restaurants (purchased by 36 percent of buyers), department stores (33 percent), Visa/Mastercard/American Express (24 percent), coffee shops (21 percent) and entertainment (18 percent).

“Due to the continued popularity of gift cards, as well as many of our local and national retailers offering sales and promotions, we expect the Mall at Fairfield Commons to be very busy during the last week of the year,” said Kristie Miller, general manager of the Mall at Fairfield Commons.

The post-Christmas spending comes after retailers saw record spending in November and December. From Thanksgiving Day through Cyber Monday, more than 174 million Americans shopped in stores and online, according to the National Retail Federation. That beat the 164 million estimated shoppers expected to come during the weekend.

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“All the fundamentals were in place for consumers to take advantage of incredible deals and promotions retailers had to offer,” said Matthew Shay, NRF president and CEO. “From good weather across the country to low unemployment and strong consumer confidence, the climate was right, literally and figuratively, for consumers to tackle their holiday shopping lists online and in stores.”

GOBankingRates.com releases the best and worst gift cards to give each year, and considered criteria including purchase fees, expiration dates, reward options, balance requirements, and shipping options in creating the ranking list.

The worst places to buy a gift card to this year include: Payless ShoeSource, Ace Hardware, Ann Taylor, AutoZone, eBay, GameStop, JCPenney, Kmart, Macy’s, Rue21 and Sears, according to GoBankingRates.com. The best places for gift cards include: Starbucks, Amazon, Walmart, Target, Nordstrom, Kohl’s, Gap, Lowe’s and Fandango.

Gift card rules

Gift cards good for five years: A gift card or general purpose prepaid card may not expire earlier than five years from the date of activation (or the date when funds were last added to the card) and if there is an expiration, the terms and conditions of that expiration must be clearly disclosed prior to purchase.

Gift cards exempt: It used to be that gift card companies charged fees to load cards and immediately began imposing monthly fees to deplete the balance of the gift card until the full load value had been drained. Gift cards are now exempt from dormancy, inactivity or service fees unless the card has gone unused for a year and the non-use fee terms are clearly disclosed prior to purchase.

Phone cards not covered: Prepaid phone cards, promotional gift cards, loyalty cards and paper gift certificates are not covered by these rules. If you receive a gift card without paying for it (e.g. cable company sends you a free gift card as a thank you for switching services), pay close attention to the terms because those gift cards can (and often do) expire very quickly.

Source: Tribune News Service

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