Gift cards have become a popular gift-giving option in recent years. Rather than trying to guess what gift the recipient may want, gift cards allow them to choose for themselves. This flexibility makes gift cards an attractive choice for many gift givers. However, some people wonder exactly how much gift cards cost and whether they end up spending more by purchasing a gift card versus a traditional gift. Here is an overview of how much gift cards typically cost and some factors that influence the price.
Upfront Cost of Gift Cards
When purchasing a gift card, the upfront cost is usually the face value of the card. For example, if you buy a $25 gift card to Starbucks, the gift card will cost you $25. The recipient can then use the gift card to make $25 worth of purchases at Starbucks. Some retailers may charge an activation fee for the gift card, but many major retailers do not. Activation fees are more common with prepaid Visa or Mastercard gift cards. The fees often range from $2 to $6 per card.
Gift Card Fees
While the upfront cost is typically just the face value, there are some other fees to be aware of with gift cards:
- Purchase fees – As mentioned, some merchants charge an activation fee for purchasing the gift card. This fee is not very common with major retailers.
- Dormancy fees – If the gift card goes unused for a long time (usually at least 12 months), the retailer may start charging a monthly fee. This fee can range from $2 to $5 per month.
- Replacement fees – If the recipient loses the gift card, replacing it may incur a fee, often around $5 to $10.
As long as the recipient uses the gift card in a timely manner, you can avoid these extra fees in most cases.
Gift Card Discounts and Promotions
There are sometimes opportunities to purchase gift cards at a discounted price. Retailers may offer promotions around the holidays to encourage gift card purchases. For example, you may be able to purchase a $50 gift card for $40. Cashback websites like Rakuten often offer cash back on gift card purchases as well. Credit card reward programs could potentially offer bonus points on gift card purchases too. Taking advantage of these types of offers is a great way to stretch your gift card dollars further.
Hidden Costs of Gift Cards
While the upfront cost of a gift card tends to be straightforward, there are some hidden costs and drawbacks to consider as well:
Possibility of Overspending
Since gift cards essentially function as free money for the recipient, some people may be inclined to overspend when using them. For example, if you give a $25 Starbucks gift card, the recipient may be less hesitant to purchase more expensive drinks than they would with cash. Several studies have found that people are more willing to treat themselves and spend more frivolously with gift cards.
Not Using the Full Value
Statistics show that a portion of gift cards go unused each year. One survey found that U.S. consumers had $21 billion in unused gift cards from the prior holiday season. If the recipient does not end up using the full value of the gift card, it essentially means wasted money for the giver. The recipient misses out as well.
No Interest Earned
With cash, the recipient could potentially earn a bit of interest while they hold onto it in a savings account. Gift cards do not earn any interest or returns while the money goes unspent. Especially if it takes months or years for the recipient to use the card, the giver misses out on potential interest earnings.
Possibility of Losing It
Given their small size, gift cards can easily be misplaced, left in a wallet or thrown away. Stores will generally replace lost gift cards but may charge a fee. According to one estimate, consumers lose over $1 billion collectively on unused gift cards each year.
Are Gift Cards Worth the Cost?
At the end of the day, are gift cards worth what you pay for them? There are valid pros and cons to consider when deciding if gift cards are cost-effective.
Benefits of Gift Cards
- For the giver – Easy to purchase and ship, works for recipients you do not know well
- For the recipient – Can select their own purchase, no returns needed, feels like “free” money
- For retailers – Upfront revenue, may lead to excess spending, unused balances
Downsides of Gift Cards
- Possibility of overspending, not using full balance, fees
- Less personal than a traditional gift
- Money is tied to one retailer
Here is a table summarizing the key costs and benefits of gift cards for the giver and recipient:
| Gift Card Costs | Gift Card Benefits |
|---|---|
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Average Cost of Popular Gift Card Brands
Gift cards come in a wide variety of denominations and brands. Here is an overview of the average upfront costs of some popular gift card options:
Retail Gift Cards
- Amazon – $25, $50, $100
- Target – $10, $25, $50
- Walmart – $10, $25, $50
- Starbucks – $5, $10, $25, $50
- Nike – $25, $50, $100
- Best Buy – $15, $25, $50, $100
The standard denomination values make it easy to find a gift card that fits your budget. Retail gift cards usually range from $10 to $100. Many retailers now offer eGift cards for convenience and faster delivery as well.
Restaurant Gift Cards
- Olive Garden – $25, $50
- Outback Steakhouse – $25, $50
- Chipotle – $10, $25
- Panera Bread – $5, $10, $25
- Domino’s – $10, $25
- Chili’s Grill & Bar – $25
Popular restaurant chains frequently sell gift cards online or in the establishments. Values often range from $10 to $50 for dine-in chains. Fast food places may offer cards as low as $5 or $10.
Visa/Mastercard Gift Cards
- Visa – $25, $50, $100
- Mastercard – $25, $50, $100
- American Express – $25, $50, $100
Prepaid credit card gift cards provide more flexibility than retailer-specific cards. They can be used anywhere the brand is accepted. Denominations usually start around $25. Activation fees generally apply.
How Much to Spend on Gift Cards for Different Occasions
How much you should spend on a gift card often depends on the occasion. Here are some recommended gift card amounts for different situations:
Birthdays
For adult birthdays, $25 to $50 is common. For milestone birthdays like 21st or 50th, you may spend $50 to $100. For children, $10 to $25 is typical.
Weddings
Around $50 per wedding invitation is a safe bet. You may spend up to $100 for very close friends or family.
Christmas
Spending $25 to $50 on gift cards for Christmas presents is standard. For close family, you could spend $50 to $100.
Graduations
Consider $50 to $100 gift cards for high school or college graduates. This gives them flexibility to use it for something fun or practical.
Teachers
$15 to $25 gift cards make nice gifts for teachers from students. Popular picks are Target, Amazon or Starbucks.
Babysitters
For frequent babysitters, $15 to $20 gift cards are a thoughtful periodic gift of appreciation.
Tip: Ask the recipient for gift card suggestions to ensure you purchase one they will use and enjoy.
Conclusion
When it comes to gift cards, the upfront cost is typically simply the face value you choose to purchase. While hidden fees and unused balances can chip away at the true value, gift cards remain a popular present thanks to their flexibility and convenience. Knowing the standard price points for different occasions and brands helps take the guesswork out of gift card shopping. With a little strategic thinking, gift cards can be cost-effective and still provide joy for the recipient.