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Strong opinions, weakly held

The pros and cons of gift cards

The argument against gift cards is well known: they’re just cash you can only spend in one place, and they are profitable because people forget to use them or don’t use the entire balance. Andrew Leonard, though, has a good argument in favor of gift cards:

So why not just give the boy cash? Surely cash would allow an even more efficient allocation of resources? But cash is inferior, I think, because cash, like it or not, carries with it some assumption of responsibility. You don’t want to waste your cash frivolously, or you might feel compelled to save it for some greater goal. You might end up, horror of horrors, being forced to use it to buy some other kid a birthday present! But a gift-card to, say, GameStop, is a ticket to freedom. Go be frivolous! Buy a game! Buy whatever game you want! It’s better than money because it comes with an explicit, unignorable directive to use it in a way that gives you pleasure.

The upshot seems to be that cash is a better gift for the irresponsible, but that gift cards are a better gift for responsible people. That works nicely, because irresponsible people are also the ones most likely not to use their gift cards at all.

2 Comments

  1. Just a minor quibble here…seeing as how I work for a prepaid card company…there are lots of “open network” gift cards that carry the Visa, Mastercard, Discover, or AmEx flag and are accepted everywhere, just the same as their credit cards. The “closed network” cards are the ones that are only accepted at a specific retailer, like GameStop in your example. So you could buy a Visa Gift Card and the recipient can use them anywhere, just like cash, not just at one place.

  2. I like the states that treat unspent portions of gift cards as unclaimed funds and appropriate it from the issuers. It’s the only fair way of doing it – the card buyers certainly did not intend to give a gift to the card issuer when they bought the card!

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