There was a time when  we would buy presents for each. Actual physical items carefully chosen*, wrapped up, sticky-taped and tossed under the Christmas tree. There was the joy (and apprehension) of opening something that by most senses was a complete mystery.

Presents aren’t such a tradition anymore for us. Gift cards dislodged that idea long ago.

Not only can you wipe out about 90% of the toil of Christmas shopping, you can say you’re actually doing the recipient a favour. No longer do they have feign surprise/delight of an unwanted present as they get to choose their own things.

The only choice needed by the buyer is is which store/s will the card be valid in and how much value will be on the card. Sometimes you don’t even need to wrap them up as they come with their own packaging too.

But is it all that it’s wrapped up to be?

Giving cash might traditionally be seen as too impersonal and unthoughtful, but really are gift cards any better? If you’re going to give someone a gift card, you’re essentially giving them cash with a number of caveats placed on it.

The purchaser has essentially given the store a cash-advance for products that will be purchased in the future.  The store then has the ability to invest this money before it’s been spent by the customer. Not the customer typically cares about this, but it’s a real benefit to the company. Like a government bond, (Briefly: where the government raises capital to pay for projected expenditure by issuing ‘bonds’ to public investors) gift cards have a secondary benefit for a store to raise capital in the here and now. They can make use of the time-value of money to turn a profit beyond the wholesale/retail price difference. The customer doesn’t get this benefit, in fact prices may go up by the time they use the card; and generally this should occur as an adjunct to inflation.

There’s also the very real risk that gift cards may (and have in some instances) become completely worthless. Dick Smith folded this year due to a very complicated and devious private equity takeover. The books were muddled and obfuscated to a point where DSE had a whole bunch of stock they couldn’t sell and were deep in the red. Not after the private equity firm quickly flipped the sale for a quick profit.

Gift card owners are basically unsecured creditors. There are no provisions or protections against owners of gift cards. And unlike tangible items that can be returned, gift card owners have essentially traded REAL cash for a PROMISE. A promise to fulfill items to the amount stated on the card. But the clincher is that there is little compulsion for the amount to be reimbursed if a company folds. Card owners are usually on the last rung as they have no bargaining power.

Another problem is that gift cards expire. I have had instances where gift cards have been left buried under plastic cards in my wallet, only to be discovered a year or two later. Said piece of plastic is completely worthless. (can be used to make guitar picks if there was any leftover utility in them). I can also imagine the glee from the accounts department when they report the number of expired cards for the month in an Excel spreadsheet. Free money for the company for doing nothing!

And unlike Opal and other card-systems, if you lose a gift card you lose your money (that why they tell you to “treat it like cash”). In a zero-sum game kinda way, your loss can be somebody else’s gain. Cards aren’t usually protected to an owner. I had the opportunity to find about $20 of gift cards in a park while cleaning trash (and there was no way to identify who the owner was). Unless you write your details on your card, it’s as good as gone.

Gift cards are mostly direct cash equivalents in that it can be bought for the same price that the card holds value of. They’re only one step removed from cash. Though there are some companies now that are charging exorbitant fees to exchange real cash to quasi-cash. Westfield is guilty of this practice as is the Eftpos card. A $50 Westfield/EFTpos gift card will cost $55.95. This represents a setup cost of more than 10% charge of the card’s value. Crazy!

Gift cards usually come in fixed amounts, $10, $20, $50, $100 etc. When buying things on gift cards it’s almost expected that there will be residual value left over. There are a few options:

a) buy something else to use up the left over value

b) let it expire

c) buy something that matches as close to the value that is left on the card

None are ideal. in A) the store has just extracted more value out of you. More than what was stated in the card. B) You have lost value.  and C) You have potentially bought something you didn’t exactly want to avoid waste.

Gift cards are essentially time-limited fixed-domain quasi cash, only with more downsides than the thing it’s supposed to substitute.

So where am I going with this? If we’re going to straddle the line between being thoughtful and practical. And which gift-cards are presumably the happy medium… then why don’t we just go the whole hog and give cold hard CASH and put it in a nice tin or decorated cardholder or something.

Cash will never expire, never be worthless, it will be accepted in all stores in Australia for any goods and any services. A universal gift card accepted anywhere! And this wonderful invention has only been around in Australia since the holey dollar was passed around.

As always caveat emptor

* or just finding the nearest acceptable present you can get away with

ATTN: Oh crap. It looks like I subconsciously “ripped off” an article I had read about 10 months ago.   http://www.abc.net.au/news/2016-01-06/knight-dick-smith-and-the-folly-of-gift-cards/7071164