Mellody Hobson's Gift Card Advice

According to the National Retail Federation, the average consumer plans to spend $702 on the holidays in 2004, an increase of 4.5 percent from 2003. And the top gift this year: gift cards, which are expected to surpass clothing for the first time, according to a survey by Deloitte & Touche. Additionally, 74.3 percent of consumers will buy gift cards this holiday season, with the average gift card purchaser buying 3.38 cards for a total of $108.28. With this level of demand, consumers are expected to spend $17.34 billion on gift cards this holiday season.

Although the packaging may differ, gift cards are essentially debit card look-alikes which allow a gift giver to place a certain dollar value on the card, which can then be used like a debit card at participating merchants. Gift cards are offered by retailers, restaurants, hotels, shopping malls, credit card companies, banks and even airlines -- examples of issuers include Target, Gap, Home Depot, Starbucks, McDonald's, Dunkin' Donuts, Chili's, Marriott Hotels, American Express, Bank of America and America West Airlines.

Last-Minute Shoppers

For all those last-minute shoppers, gift cards can be tremendously useful. Many issuers now enable you to order gift cards online and have them delivered by Christmas day. If you are not sure what to get, ( is an online vendor for gift cards and certificates. Partnering with hundreds of merchants -- including Crate & Barrel, L.L.Bean, Blockbuster, Macy's, AMC Theaters and Domino's Pizza -- allows you to order gift cards from various merchants which can be mailed directly to your recipients. The site also allows you to search for the store locations of each merchant by city, state and zip code. Keep in mind, as with other gift cards, gift cards ordered through are not returnable and if the merchant goes out of business, will not provide refunds.

Buyer Beware

While there are many obvious benefits to gift cards -- gift recipients can get exactly what they want and they can take advantage of post holiday sales -- there are also hidden costs and restrictions to be wary of:

      Fees to purchase gift cards: Although retailers generally do not charge consumers processing fees to purchase gift cards, many credit card companies and banks do. For example, American Express charges $3.95 for gift cards ordered online and $7.95 for those ordered by phone, while Bank of America charges fees ranging from $5.95 to $11.95 depending on the value of the card and how it is ordered (online or telephone).

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