Gift cards have become one of the most popular gift choices in recent years. Also known as gift certificates or store credits, gift certificates allow recipients to choose exactly what they want within a set spending limit.
The Origins and Growth of Gift Certificates
The first modern gift certificates were introduced in the late 1980s and early 1990s by retailers like Barnes & Noble, Home Depot, and American Express. However, it was not until the mid-1990s that gift certificates truly took off in popularity. Developments like universal gift certificates that could be used at multiple stores, as well as the growth of large retail chains, helped drive broader adoption of gift certificates by consumers and merchants. By the early 2000s, gift certificates sales in the United States exceeded $100 billion annually according to industry reports. This figure has grown steadily ever since as gift certificates displace traditional presents under trees and in stockings every holiday season.
How it Work
When purchased, a Gift Card functions like a prepaid debit card that can only be spent at a designated retailer or group of retailers. The monetary value of the gift certificates is encoded on a magnetic strip on the back of the plastic card or stored digitally if the gift certificates number is provided. At the point of sale, the card is swiped or the number manually entered so the purchase amount can be deducted from the remaining balance. Lost or stolen gift certificates can generally be replaced for a small fee if the purchaser has the gift certificates number and security PIN. Unused balances also do not expire for many years, allowing recipients flexibility in when and how to spend their gift.
Benefits of Gift Cards Over Traditional Presents
One of the major appeals of gift certificates is they take the guesswork out of gift giving. No more worrying if the gift recipient will like a certain item or if it is the right size–with a gift certificates, they can choose exactly what fits their needs and tastes. Gift certificates also suit recipients of all ages, from kids to grandparents, since the spending options are tailored to the merchant. There is less waste compared to physical presents as well, since gift certificates ensure the item is something the recipient wants rather than having to re-gift or return an unwanted item. Another advantage is gift certificates free the gift giver from picking out, wrapping, and shipping a physical present each time.
Concerns Regarding Gift Certificates
While gift certificates present many convenience benefits over traditional presents, there are some concerns that have been raised by consumer advocates. One issue is that gift certificates expire or impose inactivity fees after a period of non-use, such as one to three years depending on state laws. This results in the transfer of unused funds from the consumer to the merchant. There are also instances of gift certificates being rendered unusable if the issuing retailer goes out of business. However, protections have gradually improved in recent years through legislation limiting expiration dates and inactivity fees on most gift cards. Fraud and theft of gift certificates numbers is also a small risk, though security features make this less of an issue than other payment methods.
The Future of Digital Gift Cards
Looking ahead, industry experts expect digital gift certificates redeemable online or through mobile wallets to gain even more popularity relative to plastic cards. Digital gift certificates eliminate paper, postal delays, and the risk of loss or damage in transit. They are also more eco-friendly. Major retailers like Amazon, Target, and Walmart have already shifted to primarily offering digital gift certificates that can be instantly delivered via email or text. Other technologies on the horizon may allow gifting of funds directly between digital payment accounts without a standalone gift certificates. Overall, the convenience and versatility of gift certificates ensure they will continue disrupting traditional gifting norms for years to come.
Gift certificates have revolutionized gift giving since first emerging in the 1980s. Offering flexibility for givers and recipients alike, gift certificates now capture over $100 billion in annual sales in the United States alone. While some concerns exist regarding expiration policies and merchant risk, continued improvements are addressing these issues. Looking ahead, digital gift certificates poised to largely replace physical plastic cards. The gift that keeps on giving, gift certificates show no signs of losing popularity for birthdays, holidays and other gifting occasions.
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