Gift card sales on the rise

The sale of gift cards is up significantly from last year. But how good of an idea is it to buy them?

The Orlando Sentinel reports that people are expected to spend $28 billion on gift cards by the end of 2011, up from $24.8 billion in 2010. Yet my position on gift cards has never changed.

If you buy “at par,” meaning you buy a gift card at straight face value, you have made a bad purchase. You’ve taken money that can be used anywhere and turned it into scrip that can only be used at one particular restaurant or retailer. If that place folds, you’re out the money. I’ve seen that scenario happen way too often.

Of course, gift cards can make sense in some situations. I’ll give you an example: I bought an iTunes store four-pack of gift cards at a warehouse club because my mother in law wanted to give them to her grandkids. The pack was being sold for $84, not $100, so we got more than we paid out.

Some restaurants and spas will give you more value than you pay for too. But the failure rate among those businesses can be scary. So here’s my advice: When you get the cards, use them. Don’t let moss grow under your feet.

By following my simple rule — a gift card that is above par is good, while one at par is bad — you can turn what could be a crummy purchase into a good buy.

Speaking of buying, I saw a recent figure from America’s Research Group that surprised me: More than a third of all Americans finished all their Christmas shopping last month! Wow, talk about being prepared. Now they can sit around as everybody else looks for parking spaces and stands in line!