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What’s The Real Cost Of A Gift Card?


We’re in the final weeks of the holiday shopping season. You have a gift for everyone on your list. Well, almost everyone. There always seems to be one or two hard-to-buy-for people. Or people you want to acknowledge, but getting something too personal may not be appropriate. Gift cards have become the go-to gift for many of us. In fact, according to WalletHub, sales of gift cards are expected to reach $204 billion this year. A five percent increase over last year.* The next time you see the gift card display at your favorite retailer or if you’re planning to buy them online, here are a few things to consider. While they can be an easy way to make someone happy, be aware that you could be paying a premium for the convenience if you don’t shop around first.

There’s More Than One Type Of Gift Card
There are two basic varieties of gift cards:

  • Store and service gift cards can only be used at a particular retail establishment or service, such as a video streaming provider.
  • “General-purpose” gift cards sporting the American Express, Visa®, or Mastercard® logo that can be used virtually anywhere.

For both, all you have to do is load them with the dollar amount of your choice and they are good to go. Many come with pretty pictures (images of holidays and birthday scenes, for example) and attractive packaging.

So which type should you buy? If you want to make the most of your money, give a store or service card since they tend to have no or very low fees. However, get a general-purpose gift card if you want the recipient to have maximum shopping flexibility. While they tend to be fee-heavy (which can erode the value of your giving dollars), the shopper isn’t limited to one specific store or service.

The Advantages Of Gift Cards
If you can’t figure out by what to buy someone, any gift card may be better than a random selection. They are easier to use than paper gift certificates, safer than cash, and more festive than a check. Determine how much you want to spend and choose a store, service, or financial institution. All the recipient has to do is shop. In the case of the general-purpose card, the “giftee” can even take out cash at an ATM.

Another benefit is that they can be used as an effective tool to introduce the concept of credit to children and young adults. Since gift cards look and act much like credit cards, if you give one to a minor, they will begin to become accustomed to using plastic. There will be no bill to pay at the end of the month, but there is a limit on how much they can spend, so they can learn to be savvy consumers early.

The Drawbacks Of Gift Cards
Both types of gift cards come with a few downsides, but because general-purpose cards have more advantages, they also can come with more extensive fees. Be sure to weigh the costs and compare products before you buy one. The terms will be apparent on the application. Fees can include but are not limited to:

  • Purchase fees. When you purchase the card, there may be a fee based on the denomination. The lower the dollar figure, the more expensive, ratio-wise, the fee becomes.
  • Activation or closing fees. If the recipient wants to activate or close the card out for the remaining stored value, they may be charged an activation or closure fee.
  • Dormancy or inactivity fees. According to the gift card provisions of the Credit CARD Act of 2009, institutions could charge a monthly service fee to keep the card active if there is a period of inactivity of at least one year.
  • Reload fees. Want to add more money to your card? Watch out for the balance reloading fee.
  • Card replacement fees. Lost or stolen cards may be replaced with a new card for the remaining balance for a “reissue fee,” so it may not be worth the effort if the remaining value is small.
  • Shipping fees. Like most products ordered online, gift cards could also have a shipping charge depending on the amount purchased.

Other Miscellaneous Fees
While many general-purpose gift cards allow ATM access, the transaction fees can be steep. And if the card is used at an ATM not owned by the issuing financial institution, even more charges will be deducted. Service fees are another consideration. Want to speak to a customer service agent? There could be a fee for that, too!

Gift cards can indeed be a great present. But before you buy, shop around for a card with the fewest fees and restrictions. That way, your dollars will stretch the furthest, and the person you’re giving it to will reap the most from your generosity.

One Final Thought
The holiday season is full of good cheer but also fraudsters. We will NEVER call or text you for any personal information, username, passwords, or passcodes. If you receive a call, email, or text from any number or person claiming to be an employee of the Credit Union requesting this information, LET US KNOW BY CALLING US DIRECTLY at 800.877.2345. Have a safe and wonderful holiday season!

*McCann, Adam, “Gift Card Market Size,”, 12 September 2023.

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