Americans spend, on average, more than $700 shopping for loved ones during the holiday season alone. But whether dashing through the snow, celebrating a birthday or congratulating a recent grad, there's one gift that tops everyone's lists: gift cards. During the 2011 holiday season, nearly 60 percent surveyed by the National Retail Foundation hoped Santa would bring them a gift card -- more than any other gift category. However, not all gift cards are created equal.
The two basic categories are open-loop and closed-loop cards. Open-loop cards are those from banks or credit card companies, and these cards are accepted anywhere the issuing card company is accepted (i.e. Visa, MasterCard, American Express). Closed-loop card are distributed by a single retailer (or family of companies) and can only be redeemed at that store, or, often, at other stores owned by the parent company. While closed-loop cards typically have fewer restrictions (as mandated by the Credit CARD Act of 2009), they don't offer as many options. Open-loop cards allow the recipient more freedom, but typically at a higher cost to the gift-giver and, possibly, to the recipient.
The availability of electronic gift cards has also become an important feature in the gift card giving process. As of November 2011, according to RSR Research, 60 percent of the top 100 online retailers offered e-cards, which could be delivered via email, social media or mobile devices. Earth911 reports that during roughly the first half of 2011, more than six million electronic cards were sold. These cards may be more convenient for buyers, who don't need to trek to the store or pay for shipping, and for recipients, as e-cards have less potential for fraud and are harder to lose. They also have less impact on the environment, and may easily be customized.
Of the open-loop cards surveyed by CreditCards.com, American Express (*Est. $3) was the only card to offer electronic delivery, and AmEx cards do not expire or charge dormancy (inactivity) or maintenance fees. However, they charge a purchase fee of $2.95 for e-cards and $3.95 for plastic cards. The American Express eCard also earns the highest score of any closed-loop card from ScripSmart, which scores cards' "consumer friendliness." Note: No open-loop card performs as well as closed-loop cards at ScripSmart.
Despite the purchase fee, the American Express gift card is the best bet among open-loop cards, especially since it is the only such card to offer e-delivery. Other downsides include: American Express tends not to be as widely accepted as its competitors; it can only be purchased in preset denominations from $25 to $3,000 (holiday designs only available up to $200); and cards can not be shipped to Hawaii and Vermont. Both the gift and e-gift cards can only be used stores in the United States (online or physical stores), and some in-store merchants may not accept the e-gift card, as there is no physical card to present.
Competition is fierce among closed-loop card sellers, and more reviewers offer their input in this category. Interestingly, Mashable listed the gift cards consumers most wanted to receive in 2010 (at the time of publication, the roundup was not repeated for 2011 as the writing of this report), but these cards were not ranked among the best according to objective factors considered by CreditCards.com, ScripSmart, and RSR Research. Wal-Mart, Amazon.com, and Target ranked at the top of wish lists, though none of these big-box retailers ranked quite as well as clothing retailer, Gap.
Wal-Mart was, however, pegged by CreditCards.com as one of the retailers offering cards with the most benefits. Wal-Mart gift cards do not expire, are reloadable, offer online balance check, can be delivered electronically or shipped for free, and Wal-Mart replaces funds if the card is lost or stolen. RSR Research selected Amazon.com as one of the top five electronic gift cards. But Target did not receive praise from any of our other review sources. Another retailer to perform well, according to reviewers, was Best Buy, which offers the same benefits as Wal-Mart, and was listed as one of the best electronic gift card sellers (second only to Home Depot) by RSR Research. Bass Pro Shops may also be a good option for the dedicated outdoorsman or woman. Bass Pro Shops was one of the top 10 electronic and plastic gift cards according to ScripSmart, and Esquire magazine's Alexandra Ilyashov names it a great gift for the "overworked" and praises the quality of the store's card and merchandise alike.
Despite all of these accolades for merchandisers' cards, Gap reigns supreme, with more reviewer picks than any others. Like Wal-Mart and Best Buy, the Gap GiftCard does not expire, is reloadable, offers online balance check, can be delivered electronically or shipped for free, and is replaced if the original card is lost or stolen. But Gap adds additional value, as the card can be redeemed at any Gap-owned store (regardless of the card's branding), including Gap (as well as BabyGap. GapKids, GapBody, Factory and Gap Outlet stores), Old Navy, Banana Republic, Athleta and Piperlime. Gap cards can be purchased online or in-store, and when purchased online, they can be delivered by mail or electronically for free.
RSR Research also points out that, while having one of the top five best electronic cards, Gap also offers some of the best personalization, allowing the buyer to add photos and a personal message. ScripSmart gives Gap's GiftCard a score of 98 out of 100, putting them among the top 10 plastic cards, and Esquire magazine names Gap gift cards the best option for the "insatiable shopper." Reviews on the Gap website reveal that buyers are, overall, satisfied with Gap gift cards, though the personalization process may be somewhat confusing. Besides this, the only downsides we found were that multiple cards can't be merged, and gift cards can't be used to pay the balance on a Gap credit card.
To find the gift cards with the best value for gift-givers and recipients alike, we looked to organizations that survey the gift card industry regularly, including CreditCards.com (owned by BankRate.com), ScripSmart and RSR Research. These sites provide objective reviews of open- and closed-loops cards' fees, usability, and redemption options. Esquire magazine and Mashable also list favorite gift cards, and consumer reviews were available from some retailers' websites, too. Other useful sources include the National Retail Foundation and Earth911.