Seven Smart Ways to Make the Most of Gift Cards

Americans love giving gift cards during the holiday season. In fact, gift card sales are expected to reach $100 billion by 2012, according to TowerGroup, a research and advisory firm.

Yet, recipients don't always remember to use them.

Last year, Americans were predicted to spend $91 billion in gift cards, according to November 2010 figures from TowerGroup, a research and advisory firm. That averages out to more than $300 for every man, woman and child in the country. The firm also estimated $2.5 billion on those gift cards would go unused.

If you receive a gift card during the holidays, don't let it collect dust.

Make it easy to reach for the gift card instead of your hard-earned cash. That means you want it with you when you're likely shopping, not at home in your sock drawer, says Hillary Mendelsohn, author of "thepurplebook" series of online shopping guides and founder of

How else can you get the most out of the gift cards you buy or use this holiday season? Here are seven savvy tips.

Mark Your Calendar

The Credit Card Accountability, Responsibility and Disclosure Act of 2009, or Credit CARD Act, limits some of the fees gift card issuers can levy. Here's the rundown on the three major protections you need to know if you're using gift cards.

  • Funds on the cards must be good for at least five years. Money added later must also be good for at least five years.
  • Issuers generally aren't allowed to charge any fees within the first year after a gift card is purchased. You can be charged a fee to purchase the card and to replace a lost or stolen card.
  • After one year, issuers are limited to one fee per month, says John Breyault, director of the National Consumer League's Fraud Center.

Make sure you're aware of any fees associated with the cards you receive, says Michelle Jun, senior attorney with Consumers Union.

Use gift cards within a year of when they were purchased, she says.

One good way to remember just how long you have: Mark your calendar, says Mendelsohn. That way, you won't lose your gift card's value to fees or forgetfulness.

Know the Different Types of Gift Cards

Gift cards come in two basic flavors: closed loop, or those specific to one retailer or retailer group, and open loop, or general, network-branded cards that can be used anywhere.

Each has benefits, so it pays to know which one you have or want to give, says Breyault.

With closed-loop cards, offered directly by retailers, there are usually no fees -- either at purchase or later. You'll pay $50 for a $50 gift card.

The downside: If the retailer has no locations nearby or an online shopping site, closed-loop gift cards can make shopping inconvenient. If the store goes under, the card could be worthless.

"Times are tough," Breyault says. "You never know who's going to make it and who's not."

Open-loop gift cards often carry the imprints of major card networks, such as Visa, MasterCard, Discover or American Express. They can typically be used almost anywhere that accepts that brand. The trade-off: Consumers usually pay a fee to buy the card, says Breyault. After the cards are a year old, the issuer could assess other fees.

Pair Your Gift Card With a Coupon

Retailers often don't let you combine coupons, says Mendelsohn. But you can combine gift cards and coupons and really leverage your buying power, she says.

"You have free money, and you can use a coupon," says Mendelsohn. "So take advantage of it."

Her tip: Go online and search the retailer's site for either coupons or coupon codes. If it doesn't specify "online only," they have to honor it in the store, says Mendelsohn.

And, if you have a smartphone, you can carry the online coupon there, just in case you need to show it to the clerk, she says.

Don't buy Just Because you Have a Gift Card

It seems contradictory: Yes, you want to use that gift card quickly. However, you don't want to buy just to buy.

If you really want to make a smart purchase, "wait for something that you actually really need or want," says Mendelsohn.

Still stuck with an aging gift card and don't know what to buy? Or maybe the card isn't to a store you love?

Either regift the card or use it to buy a present for someone else, says Mendelsohn. And take the money you free up and treat yourself.

"It's a great way to not spend your own money," she says.

They also make a great tool to save money toward a big purchase, says Mendelsohn, whose family used gift cards to pay for two computers.

"Particularly with kids," it's a great way to impart the lesson of saving for a goal, she says. "Even though it's a gift card, it really teaches them -- you can accumulate and get something really meaningful."

Share a 'Heads-up' With E-Gift Cards

A new twist on gift cards that is really gaining in popularity? Electronic gift cards, says Breyault.

One problem with e-gift cards? Recipients don't always realize what they are. "A lot of times people will receive it and won't even look at it -- they'll assume it's spam, says Mendelsohn.

"So you can pre-empt that by saying 'I wanted you to have this on your birthday, and I'm sending it, so watch out for it,'" she says.

Want to make sure that e-gift cards reach their destination?

Double-check those email addresses, says Mendelsohn. A typo or old address can mean your recipient never gets your e-gift card.

Follow up with a note to confirm it actually arrived and was for the correct amount, she says.

What you might not know: Remember all those protections the Credit CARD Act confers on your gift cards? They apply to e-gift cards, too, says Breyault.

Yes, Virginia, There Are Gift Card Thieves

It's a sad fact: If someone comes up with something cool, someone else figures out how to steal it.

One favorite trick: Scammers copy gift card numbers and check periodically to see if the cards have been activated, says Jay Foley, principal partner for ID Theft Info Source. When they are, the thieves then use the numbers to spend the money loaded on the card.

One way to fight back: Check the balance periodically before you use the card. Some gift card providers allow you to do that through their websites. While you're there, you can also find out what the policies are in cases of loss, theft or fraud.

If you see unexpected activity on your card, report it to the store or the gift card issuer.

In some cases, you may also need the receipt from the person who originally paid for the card.

Another strategy: Use the card as soon as you get it, says Foley.

Saving it for something special? Put the pertinent information, plus the receipt (if you have it), in a safe place. If anything happens to the card itself, you have the data you're likely to need if the issuer will replace it.

Keep it Fun

"Gift cards are terrific because they allow people to buy what they want," says Mendelsohn. "But a gift card can seem like a thoughtless gift if you don't let them know that you care."

So include a note telling them why you wanted them to have this gift, she says. Or get creative with the presentation. Two of her favorites:

  • Gifting your child's teacher with a $10 Starbucks gift card? Wrap it in a coffee mug.
  • Giving to someone who's saving for something special? Print a picture of the goal and fasten that to the top of the box.

Chances are there's a very good reason you wanted them to have this particular gift card (a restaurant, product or store they love; something they really want to buy), says Mendelsohn. "At least connect the dots for them."

There are so many ways you can be creative with gift cards, she says. One of her favorites for bar and bat mitzvah gifts is an inexpensive wallet with a handful of gift cards to favorite places. The gift cards can be for movie theaters, clothing stores, coffee shops, music retailers, computer gaming stores, etc.

"Kids love that -- it's a treat," Mendelsohn says. "And parents are thrilled."