Gift Card Mistakes to Avoid

Gift cards are the ultimate no-brainer gift, and with supply-chain issues making it hard for many shoppers to get their hands on what they want, gift cards are poised for another big year. Whether you're giving gift cards, receiving them, or both, read on to discover how to avoid any unpleasant surprises — including a scam that disproportionately affects one popular big-box retailer —and heed our tips to make them work a little harder this holiday season.

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Ever been asked to pay someone in gift cards? Stop right there, the FTC warns: This kind of scam, in which scammers often impersonate government agencies or legitimate companies, cheated victims out of a shocking $148 million in the first nine months of 2021. Interestingly, Target gift cards accounted for a substantial chunk of that — $35 million — and officials say victims who tried to pay a scammer with Target gift cards lost more than they did with any other kind of card. 

Related: 11 Signs You're Getting Scammed While Shopping Online

Sure, you may be savvy enough to know that gift cards are a particularly fishy form of payment, but there are other scams to watch for. According to Scambusters.org, one of the biggest is customers being sold fake or used gift cards on auction websites such as eBay. Another big risk: scammers who scan the magnetic strips of unpurchased gift cards at stores, enabling them to record the serial numbers. Once the owner activates the card, the scammer can use it. The best way to protect yourself? Avoid gift cards on auction sites, and stick to reputable card resale websites. At the store, consider buying only cards that are not sold from publicly accessible racks, or ask the clerk for cards that haven't been displayed yet — or you may end up like this unhappy Apple customer.

There are two major types of gift cards: open and closed loop. Open-loop cards aren't tied to a specific brand or retailer, and they're typically backed by a big bank or credit-card issuer such as American Express or Visa. They can be used almost anywhere, but there may be an activation fee ($3 to $7 is common). Closed-loop cards, on the other hand, are good only at certain stores or websites. They typically have no fees.

Related: Amazing Gift Card Deals From Costco and Sam’s Club

Worried about expiration dates? Federal law bars non-use fees and requires at least five years before gift cards expire. Be particularly watchful with open-loop cards, however, as tighter expiration dates are more common. Another type of gift card to check closely is any promotional gift card given as a bonus or reward. Many expire relatively fast.

Related: 50 Last-Minute Gifts You Can Pick Up at the Drugstore

Sites such as CardCash and Raise allow consumers to purchase unwanted gift cards at a discount. Savings vary depending on the retailer. A recent scan of CardCash showed 42% off gift cards to Tony Roma’s restaurant but a measly 0.5% price break on Kroger cards, for instance. Also, check redemption rules. Only some gift cards or codes can be redeemed in stores, while others are restricted to online use.

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Before buying something unneeded just to use a card, consider the alternatives. Sell a gift card for a bit under face value online at sites like CardCash; re-gift it to someone who may have use for it; donate it to charity at GiftCards4Change; or use it to buy something that can be gifted to someone else.

Gift cards can quickly overwhelm a purse or wallet. One easy solution: Use your phone. Apps like Gyft allow users to scan a card or manually enter the number, then generate a barcode a store clerk can scan. Many major retailers also have similar features within their own apps, as do payment services like Apple Pay. Or, instead of downloading another app, take a picture of the front and back of the card in order to use the number online even without the card. This is also a way to record the necessary information in case of loss or theft.

E-gift cards are simply codes buyers receive online. They can usually be used in stores as well, although buyers should confirm this beforehand, as a handful of retailers restrict their use to online purchases. When buying an e-gift card, be sure you have the correct, current email address for the recipient. If the code ends up in someone else's inbox, the recipient can claim it as their own.

Restaurants frequently offer bonuses with certain gift-card purchases in November and December. At most casual dining chains, deals like a $10 bonus with the purchase of $50 in gift cards are common throughout the holiday season. Some grocery stores also offer fuel points with gift card purchases. Kroger gives one fuel point per $1 spent, and routinely doubles or even quadruples the rate for gift cards, meaning you can get a very nice discount the next time you fill up.

Related: 19 Secrets for Shopping at Kroger

In about a dozen states, you can get some cash back once a gift card falls below a certain balance, such as $3 or $5. Residents of California can cash out any gift card with a balance less than $10, and some banks will reportedly cash out a gift card when presented with I.D. Check your state's Department of Consumer Affairs website to see what the rules are, or peek at ClassAction.org’s state-by-state primer.

A retailer can file for bankruptcy even as it continues to keep store doors open and sell merchandise. Be warned that the company may stop accepting gift cards immediately after bankruptcy proceedings begin, or may only accept them for a limited time. Debt.org recommends a few strategies if you’re left with a seemingly useless gift card, including getting your credit-card issuer involved, but in this case, an ounce of prevention is worth a pound of cure.

Related: Stores We’ll Miss Shopping at This Holiday Season