A Gift Card as the Perfect Gift? Not Anymore.

Gift cards used to offer shoppers the perfect holiday punt: You could avoid the mall and still be a hero for giving a great gift.

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But the crazy discounts that have resulted from the downturn in spending are expected to change all that.

Gift-card sales are expected to fall nearly 6 percentthis holiday season to $24.92 billion, after rising for the past four years, according to the National Retail Federation.

The average amount that people spend on gift cards is also expected to decrease, falling to $147.33 from $156.24 last year.

"Since gift cards never go on sale, some price-conscious shoppers will be passing up gift cards in favor of holiday bargains," said NRF President and CEO Tracy Mullin. "Retailers may need to make minor adjustments to holiday plans as fewer people may be hitting the stores in January to redeem gift cards."

That had become a new formula for retailers in recent years: Retailers could always explain away any shortcomings in the regular November-December season with the promise of gift-card redemption in the new year.

The rules of Christmas's past no longer apply, says Richard Hastings, a consumer strategist for Global Hunter Securities. He says the fundamentals are definitely pointing to less being spent on gift cards this year.

Nearly 23 percent of shoppers surveyed by the NRF said they were cutting back on gift-card spending because they were too impersonal. Almost 11 percent said it was because of the too-good-to-pass-up holiday sales.


Just over 3 percent of shoppers cited concern that the retailer might go bankrupt as the reason they planned to buy fewer gift cards this year.


With retailers dropping like fliesthese days, that's a surprisingly low number.

Mike Unger, a principal at Archstone Consulting, said a lot of people don't know — or, worse, don't care — that retailers in bankruptcy protection aren't obligated by any law to honor gift cards.

So, what do you do if your gift-card issuer goes bankrupt? Bankrate.com offers some tips.

Of course, gift cards are easy money for retailers and they're not about to let the category fall by the wayside. Many are introducing gift cards that double as gifts themselves— like Target's gift card that's also a digital camera — to lure shoppers.

But quite honestly, it's going to take a few more bells and whistles than that to rip some savvy shoppers away from 50- or 75-percent off cashmere!

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