Santa's bag full of gift cards this year — but it's a mixed bag

By Michelle Singletary

WASHINGTON — Can you guess what is the gift purchase of choice this year?

The Elmo doll that dances to the Village People's "YMCA"? Nope.

The new Nintendo DS video game system or Microsoft's Xbox? Guess again.

Perhaps you thought it was jewelry, which is always a best seller this time of year.

All those answers would be wrong, according to the 19th annual consumer survey of holiday retail spending plans and trends commissioned by Deloitte & Touche USA LLP.

For the first time since their inception, those little plastic gift cards, both nationally and locally, will replace apparel as the top gift, the firm says.

This year 64 percent of consumers said they intended to buy gift cards, up from 60 percent in 2003 and double the percentage of consumers who will give a gift of money this holiday season.

In another survey conducted for the National Retail Federation, 50.2 percent of consumers polled said they would like to receive gift cards, up nearly 10 percent from two years ago.

The average person purchasing a gift card this year will buy 3.38 cards for a total of $108.28, according to the National Retail Federation survey.

So what's driving this gift card trend?

"While there is certainly significant impulse-purchasing of gift cards, we are seeing a much larger number of buyers who are purposefully choosing a gift card as a first choice, saying they want to ensure the recipient receives something he or she would enjoy," said Bob Skiba,executive vice president and general manager of Stored Value Systems, one of the nation's leading suppliers of gift cards.

Most gift cards are "store value cards" and have all but replaced the traditional paper gift certificates. The National Retail Federation says that if you plan on getting a gift card, here are some important things to know:

• Not all gift cards are the same. Check around and read the fine print because retailers and banks have different policies.

• Some gift cards can end up depreciating if not used within a certain time, because of inactivity fees.

• Some gift cards can't be used after a certain period, typically 12 months.

• Some retailers are able to reissue a lost gift card, but it's important to have the original purchase receipt.

• Check carefully about other service fees and expiration dates, which are more common with mall-issued and bank-issued gift cards than retailer-issued cards.

It's important to heed this last piece of advice, according to a report in the December issue of Consumer Reports Money Adviser newsletter.

The report cites a study by the Montgomery County Consumer Affairs Office in Maryland that found many bank gift card issuers levy fees ranging from $3.95 to $11.95 just to purchase the card.

While gift card expiration dates are becoming fairly rare, "inactivity" or "dormancy" fees — usually $2 per month if a card has not been used for 18 months — have become very common, according to the report. All the bank-issued gift cards had expiration dates and monthly maintenance fees.

Out of the 30 retail cards studied, the 18 ranked highest are: Best Buy, Borders Books, Circuit City, Costco, Gap, Hecht's (May Department Stores), Home Depot, JC Penney, Lowe's, Nordstrom's, Old Navy, Pet Smart, Sam's Club, Sears, Sports Authority, Starbucks, Target and Wal-Mart.

If you want to read more about which gift cards are worth your money, go to www.montgomerycountymd.gov/consumer.

The findings compiled in this report also appear in Consumer Reports' Money Adviser and on the publication's Web site at www.consumerreports.org (click on the link for the site's Holiday Giving Guide).

If you receive a gift card, try to use it right away.

And if you find an old gift certificate or gift card, don't assume you can't use it. Recently I found a $25 gift certificate from JC Penney given to me in 1995. I called Penney's customer service and was told that I could still use the certificate.

Michelle Singletary writes for The Washington Post.