Gift cards: Should you ever use or buy them?

Gift cards are a popular present option, but they have a bad reputation too. Here’s my look at the pros and cons.

From birthday and Christmas through to leaving and wedding gifts, at some point we’ve all received and purchased gift cards.

I think the main reason we buy (and get) them is they’re an easy choice if you don’t know what to buy someone.

Personally I nab them when I want to make extra savings or cash out on cashback sites.

Neither of these or any other justifications are inherently bad ideas. But everytime you buy a gift card you are risking losing the cash on it.

Now, the vast majority of the time you’ll be ok. And many of these risks can be reduced or avoided. Still, to be safe you need to know the good and bad of gift cards.

When gift cards are bad

I’ll lead with 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 (more on this in a bit) 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. Though 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 in John Lewis & Waitrose shops and online. Use it on the John Lewis website and any refunds are in credit just to the use online, limiting when and where you can spend the card.

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. Which means that a huge number expire unused – it was estimated that an average of £31.70 was lost per person during lockdown.

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 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.

It can be hard to spend the full amounts

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 by 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. 

Most recently Arcadia is only allowing 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 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

There are ways to buy discounted gift cards. Since these are like cash I can stack them with other promotions and savings to increase by savings.

The top places to look for these are:

For example, I 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 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 I spot decent deals I’ll share them on my 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 really, really want to buy 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 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 even still have a chequebook). There are a number of banks now that let you pay in a cheque via the app.

3 thoughts on “Gift cards: Should you ever use or buy them?

  1. Nothing here that isn’t blindingly obvious really.

    1. True, but as I’m sure you’re aware when it comes to financial matters the general public don’t even think about the blindingly obvious.

      1. Thanks Alex! When it comes to gift cards we see year after year people forgetting to spend them and then losing the cash.

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