November 24, 2008

Holiday gift card sales to reach $35-40 billion, Purdue expert says

Richard Feinberg, a researcher with the Purdue Retail Institute, predicts a significant increase in gift card sales for grocery stores, gas stations and superstores (such as Wal-Mart, Super Target, Sam's Club and Costco) due to the economy.

Most gift cards - about 40 percent of those purchased - are for department stores, Feinberg says. Restaurant gift cards account for 30 percent of sales and rank second.

Research at the institute estimates that, on average, those receiving gift cards spend about 20 percent more than the value of the gift card they receive. The institute also estimates most gift cards are redeemed after Christmas and New Year's, which means they cannot be counted in retail holiday sales figures.

"The increasing amount spent on gift cards means that the sluggish holiday retail spending we predicted earlier is somewhat misleading because retailers cannot count gift card sales until the card is used," Feinberg says.

Feinberg says consumers can protect themselves from fraud by purchasing gift cards directly from a retailer or a retailer's Web site. He says people should be wary of buying cards from third-party vendors online and should never buy one with the personal identification number on the back intact.

Most gift card fraud, Feinberg says, occurs when thieves steal credit cards, purchase gift cards and then use or sell them.

Another source of fraud is when people go to a retailer online and buy cards that do not have the value promised.

Home and renters' insurance and credit card companies might protect against lost gift cards, Feinberg says.

"Buying gift cards on credit cards has additional protection since most credit card companies include 'chargeback' rights if the retailer does not honor the gift card," he says.

Feinberg says consumers should be wary of purchasing gift cards from retailers who are in bankruptcy or about to go into bankruptcy. Retailers in bankruptcy are not legally obligated to back up the cards, he says, although they may.

More information on gift cards is available from the following Web sites: CreditCard.com (https://www.creditcards.com/credit-card-news/gift-card-stories-1271.php), Plastic Jungle (https://www.plasticjungle.com) and the National Conference of State Legislatures (https://www.ncsl.org/programs/banking/GiftCardsandCerts.htm).

Writer: Greg McClure, (765) 494-9394, gmcclure@purdue.edu

Source: Richard Feinberg, (765) 494-8301, xdj1@purdue.edu

Purdue News Service: (765) 494-2096; purduenews@purdue.edu

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