I am writing this blog post whilst waiting to activate a Love2Shop high street gift card, which is being made difficult by the web site being down. Love2Shop is a gift card valid at a wide range of high street shops, and I won one in a competition. I’m sure most of us have received these as gifts before, but I want to discourage you from giving them in future. Here’s why.
1. They limit choice
Whilst Love2Shop vouchers are accepted at a wide range of retailers, most gift cards can only be redeemed at one chain of shops. So a Sainsbury’s gift card is only valid in Sainsbury’s, a Tesco gift card in Tesco, and so on. I recently received a Cineworld gift card for my birthday, however, my local cinema is a Vue. We ended up having to go to Bradford to watch a film at the Cineworld there, and the train fare cost about half the value of the gift card.
2. They steer people away from independent shops
Imagine you have a relative who really likes music and has a birthday coming up. You could buy them a £10 HMV gift card as a gift so that they could buy a CD, but what if that relative prefers to shop in a local, independent record store? I know some independent shops offer gift vouchers as well, but most gift cards are for big high street brands.
3. If you lose the gift card, you lose all of the money on it
Gift cards are not like credit or debit cards, despite being the same size and usually having a magnetic strip on them. Losing a gift card is like using cash – it’s irreplaceable. Whereas with credit and debit cards, you can usually contact your bank to have the cards cancelled before anyone else can use them, gift cards have no such protection.
4. If the retailer goes into administration, your gift card may be worthless
Over the past few years, Britain has seen several high street chains go into administration – Woolworths, Zavvi, Comet, Jessops, Jane Norman, Game, HMV, Barratts, Blockbuster and others. When an administrator takes over a struggling business, often, one of the first things it will do is stop accepting gift cards. You may be able to get a refund on the gift card from the administrator, as you are an ‘unsecured creditor’ but it rarely happens.
Sometimes, shops may continue to not accept gift cards even once they’re out of administration – as they may be a new company, they’re under no obligation to do so.
5. Gift card balances are not protected by the FSCS
The Financial Services Compensation Scheme (FSCS) will pay compensation if you have savings in a bank or other regulated financial institution that becomes insolvent, up to the value of £85000. It’s unlikely that the balance on any gift card will be held by a regulated financial institution, so if the retailer or gift card provider goes into administration, as above, you won’t have any recourse through the FSCS to claim the money on it back.
In the case of Love2Shop, if ‘Park Card Services Limited’ went into administration, then their cards may no longer be valid, even if you want to spend it at a retailer which is not in administration.
6. Gift cards expire
Gift card are usually only valid for a set period of time – usually a year but it varies. Once it has expired, the retailer is under no obligation to accept it, making it worthless.
Just give cash instead…
With the exception of the third point, cash is better in all cases. It’s valid anywhere, even in local shops, it doesn’t expire, and it isn’t owned by an organisation that’s at risk of administration. Well, if the Bank of England goes under then things must have got really, really bad.
For the recipient, £10 cash is far more useful than a £10 gift card that expires and is for a shop which the person never goes to. Or worse, you buy a gift card for a relative for Christmas only to find that the retailer goes bankrupt in January, and the gift card is no longer accepted. This actually happened to Zavvi in 2009.
There seems to be this notion that it’s improper just to give cash, or that it shows lack of thought. But, if anything, giving cash shows that you trust the recipient – to me, a gift card says that you can’t be trusted with actual money so here’s something that can only be used in specific circumstances so that you don’t blow it all on booze or something. If you’re worried about cash being stolen in the post, then send a cheque instead – yes, they still exist!
…unless there’s a really good offer on
Whilst £10 cash is undoubtedly more useful than a £10 gift card, sometimes shops will discount gift cards. For example, you might see £10 iTunes gift cards on sale for £5. In which case it might be worth making an exception and buying one, but only if you know the recipient will use it, and there’s no risk of the shop going bankrupt. Groupon and other daily deals sites run these kinds of offers every now and again, although I tend to buy them for my own use rather than as gifts personally.