Gift cards: should you ever use or buy them?

Gift cards are a popular present option, but they have some major downsides.

From birthday and Christmas through to leaving and wedding gifts, at some point, we’ve all received and purchased gift cards. It makes sense – they’re an easy choice when you don’t know what to buy someone. The issue is that every time you buy a gift card you risk losing the cash on it.

The majority of the time you’ll be fine, but there are a few risks of gift cards, many of which can be reduced or avoided. Still, to be safe you need to know the good and bad of gift cards.

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When gift cards are bad

I’ll lead with the dangers of gift cards – the reasons you could find your gift card is wasted cash.

Gift cards prevent you shopping around

One of the key tenets of Being Clever With Your Cash is getting the best deal. The easiest way to do this is very simple – shop around for the best price.

Yet if you have a gift card to use at Shop A, but the best price for what you want is at Shop B, you’ve no choice but to buy it from Shop A.

Ok, so it’s not the end of the world if we’re talking about a few quid, but you won’t want to miss out on larger savings.

And what if the shop you have a gift card for doesn’t have anything you want? You’ll end up using it to buy something you don’t need and probably won’t use. It’s a waste of money.

Refunds go back to a gift card

Another big risk of buying with a gift card becomes apparent if you need to return your purchase.

The money will go back to a gift card for the same shop. This is less of an issue if you shop frequently at the retailer, but what if it’s a one-off purchase?

It’s particularly bad if it’s a large purchase leaving hundreds of quid on a gift card rather than in your bank account.

This is why I never purchase discounted gift cards for anything I’m not certain about.

You also need to be careful here that you don’t chuck out your gift cards once you’ve used them. While most retailers will issue a new gift card, some will require the funds to go back to the original card.

Be aware that online purchases could also be refunded to credit that can only be used online. John Lewis is one worth highlighting here.

Say you’ve got a paper or plastic gift card you can use at both John Lewis & Waitrose shops and websites. Use it on the John Lewis website and any refunds are in credit just to use online only at John Lewis – but not Waitrose.

They often have hidden expiration dates

Most gift cards will have an expiration date. If you don’t use them before this date you lose the cash. That’s fine with paper vouchers, and most sent by email, where you can see this date in black and white.

But you need to be particularly careful with plastic gift cards. These can be loaded with different amounts at purchase, which means the details printed on them are often generic.

This makes it hard to see when the card expires, or how much is left on them. This means that a huge number will expire unused.

There are also different rules for different cards. Sometimes they’ll be valid for a set period, perhaps one or two years. Others will be valid for a certain time since they were last used. But it’s not always clear which is which.

Some, such as the One4All card will start charging you a monthly fee after a certain time (with One4All it’s 90p per month after 18 months).

The best way to prevent them from expiring (other than using them straight away) is to make a note of when you bought/received the card and its value. Then each time you use it, make a note of the date and new value, or keep your receipts with it, they typically have details of what’s left on the card.

It can be hard to spend the full amount

Often you’ll find that if you don’t use the gift card in one go you’ll be left with a few quid, or even pennies, left over. They’re not enough to buy something outright, so you keep hold of the card until you next go to that retailer.

And then you forget. And that money sits there until the card expires. More wasted money.

There can be limits on using multiple cards

If you’re asking multiple people to give you cards to go towards a purchase, check if there’s a limit to how many cards you can use in a single transaction.

Marks & Spencer and Curry’s, for example, will only allow 10 to be used at once.

There’s no protection with a gift card

Spending with a credit or debit card can give you some advantages over gift cards. Section 75 of the Consumer Credit Act protects credit card purchases over £100, while the Chargeback scheme for credit and debit cards is a route if you’ve problems with purchases under £100. 

If you pay with gift cards, or cash for that matter, you lose this protection.

And much like cash, if you lose your gift card there’s no way of getting it back. So try not to carry too many gift cards around with you.

They can be worthless if the shop goes bust

We’ve seen a succession of high street staples shut their doors over the last few years, and when this happens the administrators don’t have to honour any gift cards. 

A few years ago Arcadia only allowed gift cards to be used for half the total purchase, with the rest covered by another form of payment – forcing people to spend extra money so they didn’t lose the value of the cards.

Often shops closing down just stop accepting outstanding cards. Jessops, HMV and Peacocks all made gift cards and vouchers worthless overnight when they entered administration.

It’s also unlikely that buying gift cards on a credit card and using Section 75 would help you get your money back in these situations as gift card balances are usually far less than £100.

If, despite this, you still want to give a card, it would be wise to avoid any retailer which appears to be struggling.

When gift cards are good

That’s one long list of negatives when it comes to gift cards… but there are a handful of times when they can be worth the risk.

When you get an extra discount

You don’t have to buy them as gifts – you can buy them for yourself for your own shopping. And that can be a good thing when you’re able to buy discounted gift cards.

It could mean you pay less for your everyday shopping, including at places where it’s hard to find offers. For instance, though small you could get 2% back at Amazon or 4% at the supermarket – better than the rate you’ll get from a cashback credit or debit card.

And since the gift cards are like cash, you can stack them with other promotions and savings, such as in tandem with Meerkat Movies at the cinema, or with BOGOF offers.

The top places to look for these are:

• Payouts from money earned on Quidco and TopCashback
• TopGiftCards (from TopCashback)
• Cashback on gift cards from JamDoughnut, Cheddar or HyperJar.
• Any “work perk” schemes you can access
• Special offers at Amazon boosting your purchases

For example, I often get an extra 6% off John Lewis gift vouchers via my Scottish Friendly ISA perks. It comes as an email but I print it out and I’m able to use it both online and in-person at the department store and in Waitrose.

Supermarkets often run promotions on selected gift cards, such as Spotify, Pizza Express, Cineworld and Footlocker. If we spot decent deals we’ll share them on our gift card deals page.

When you spend them straight away

The main way to avoid the bulk of risks outlined above is to spend your gift card as soon as you get it! That way they can’t expire, be lost or lose their value of the shop goes bust.

When you can use them on lots of things

If you’re set on buying a gift card for someone then you could look at one you can use at multiple retailers.

Though there’s always the risk that the companies selling these could go out of business themselves, you’ve got a choice where you shop. The main ones are One4All and Love2Shop.

Alternatives to gift cards

Really you’re better off giving cash, sending a cheque or transferring money to a bank account. Yes these can feel lazy and seem impersonal. But really, is that very different from a gift card?

I know people worry that the money will just disappear from a bank account on everyday spending than buy something special. That certainly is a risk, but you can steer someone to use the gifted money in a certain way.

Perhaps you can say “use this for a nice meal out”. Or to “put it towards a new winter coat”. Hopefully if you suggest this you’ll get a nice text or email sharing when and where it is spent.

And don’t be put off sending a cheque (if you’re still got a chequebook). There are a number of banks now that let you pay in a cheque via the app.