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Getting Carded for the Holidays

Law student Samuel Jaffe won’t be standing in line in the wee hours of the night hoping to score a Black Friday deal.

Facebook And Target Begin Sale Of Facebook Gift Cards
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Facebook And Target Begin Sale Of Facebook Gift Cards

"I'd rather be in a bathrobe at 3am ordering my discount gifts or buying gift cards than being in a stampede," says Jaffe.

A Mercator Advisory Group study finds $70.5 billion was spent on store gift cards last year versus $40 billion in 2003. Even though the amount has nearly doubled in the last six years, the growth pace has begun to stall. Purchases of gift cards were up just over two billion dollars from 2008 to 2009.

"Gift card growth over the past two years has slowed down because of the economy. People have been getting deals. So, why give cash when you can get something 50 to 60 percent off for something impressive," says Eric Beder, Brean Murray, Carret & Co. Retail Analyst.

So as the Federal Reserve debases the dollar, U.S. retailers are using innovation to boost their currency of choice. There's now a growing shift from physical gift cards to cyber ones.

Facebook isn't just selling birthday balloons or Farmville fertilizer. You can now get real-world carded on Facebook through the eGift application.

First Data Prepaid Services, one of the world's largest providers of merchant processing services, has put Sears-Kmart , restaurant chain Culver's, women's specialty apparel retailer Dots, and Cold Stone Creamery eGifts available on Facebook. They can be used in store or online.

First Data Vice President Mike Hursta says you'll soon see more applications for managing and adding money to your gift cards over your smartphone.

Retailers are hoping the added convenience will help move full-priced inventory.

"A lot of merchants are finding they don't have to discount for the holidays as much because gift card holders are happy to spend the value of the card and even more," says Hursta.

That's assuming they didn't misplace or forget about their gift cards. Nearly $5 billion in gift cards went unused last year, according to the consulting firm Tower Group.

U.S. PIRG Consumer Program Director Ed Mierzwinski has worked on the credit card act and gift card reforms. Mierzwinski says, "Congress has improved your gift card rights a bit, but they are still something you can lose and may not be able to get your money back on."

Regardless, 'tis still the season to get carded. There may be zero tolerance if the card is lost, but gift receipts aren't much better. Losing them could mean you'll have an elf'in bad time trying to make returns.

Stephanie is Squawk Box producer and senior NetNet retail correspondent. Follow her on twitter@StephLandsman

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