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  • Almost all large UK retailers sell gift cards which can be bought to give to friends and relatives as presents, and can be used by businesses to award to their staff as a thank you for a job well done.

Often, gift cards are preferred over cash, as cash often finds its way to more mundane, day-to-day expenditure – with a gift card the purchaser can be assured that their recipient will use it for a special treat, and therefore the gift will be appreciated and remembered.

Store gift cards can be particularly useful when buying for children.  We all know that kids like to have the latest toys and games – but how do you know you’re not buying the same sought after toy as some other well-meaning relative?  You can save yourself the embarrassment by buying a giftcard from a top toy-store, such as The Entertainer (and don’t forget that Argos and John Lewis sell toys for all ages too).

In years gone by, stores and restaurants tended to offer paper gift vouchers, however these needed to be spent in one transaction and occasionally were subject to counterfeit attempts.

Paper gift vouchers are often only available from branches of the stores that issue them, whereas gift cards can be bought at lots of different types of outlets, including petrol stations, supermarkets (Tesco, Morrisons and Sainsbury’s stock a wide selection of gift cards, Waitrose only sells cards for Waitrose and John Lewis partnership) and newsagents, such as WH Smith.  There’s even a selection of popular gift cards on sale in Argos.

Nowadays, most retailers and restaurants use plastic gift cards.  These have the advantages of being convenient – small plastic cards fit neatly with bank cards in a purse or wallet, they are a challenge for gift card counterfeiters and off the extra advantages to the customer of being able to carry any unspent balance forward to future purchases and with some, allowing the customer to ‘Top up’ the card with more credit.  It is also much easier for businesses to arrange for their websites to accept gift cards than paper vouchers, and offer additional services such as the facility to balance check gift cards online.

From a retailer’s perspective, gift cards are much easier to handle than gift vouchers, as the value on the card isn’t “loaded” until a customer purchases the card.  This means that the gift cards can be arranged on open displays for the customer to select, whereas paper gift vouchers need to be treated securely as cash.

Progressive retailers such as Mothercare, Jack Wills and B&Q now offer the facility to purchase e-gifts online.  These are essentially electronic gift cards which can be purchased, delivered and spent immediately – they can even be send directly to the recipient by email.  Clever versions of these e-cards can be used online and, if needed, printed out and taken into a retail store to be spent there.  Digital e-gift cards are increasingly popular – research by the UK Gift Card and Vouchers Association shows 42% of millennials have already bought an e-gift as a last-minute present.

So, are there any drawbacks to using gift cards?  Well yes, a couple.

Gift Cards cannot usually be swapped back to cash

Most retailers prohibit cards being redeemed for cash: once you’ve got a gift card, your only option is to spend it at the store.  This isn’t entirely true, as there is a secondary market for gift cards.  Websites like Ebay frequently have gift cards for sale, below their face value. In most cases, these are a bargain – with 50% savings to be had on less popular, or specialist retailers.  For more popular retailers, expect savings of only 5-10%.  Of course, it is possible that the card won’t arrive or won’t work when you get it (just as it is possible with any remote auction sale) however you should be protected by eBay.

Gift cards and e-gift cards are items that are specifically excluded from Paypal’s ‘Paypal Protection’ – so watch out for this.

You will find that if you return goods that were originally paid for using a gift card to a store, or send them back in the case of an online order, the retailer will refund you by the original payment method used – i.e. they will send you another gift card.  Nice try, though.

If you have a gift card that you’d like to sell, you should also look at Zeek who will give you a cash price for your gift card.  They’re also a useful source for buying gift cards at a discount to their face value.

Gift cards normally have an expiry date

Many gift cards have an expiry date, meaning they need to be used within a set time after being purchased.  Most UK gift cards have a validity period of 2 years, such as Sports Direct and Debenhams, however some have much less (12 months), some more (B&Q gift cards are valid for 5 years, for example) and some never expire (like TK Maxx).

Cynical folks might think that this is to do with the retailer wanting to pocket the cash – and in part, this is true.  Another reason though is accountancy – businesses, especially businesses with shareholders, don’t want a massive liability showing on their accounts year in year out representing unredeemed gift cards.

Different rules about gift card validity periods apply to different cards.  Some base the validity period from the last transaction, some from the initial sale of the card and some will reset the validity period just by making a balance enquiry.  On our site we let you know what expiry rules apply for every gift card listed, so you know exactly where you stand.

Gift cards need to be treated as cash

If you lose a gift card or it is stolen, there’s a good chance the money is lost, just as with cash.  Some retailers have a registration process whereby you can register your gift card by giving your name, address and email address online.  This might get you a replacement if the card is lost – however if the value on that card has already been spent at the time you make a claim, there’s a good chance that it’s hard luck for you.

Gift cards may not be available for spending in all departments

It’s always worth looking at the terms and conditions of a store’s gift card before buying.  It is unusual for retailers to exclude product departments from gift card redemption, but it does happen.  Marks and Spencer and House of Fraser both exclude white goods (e.g. kitchen appliances like washing machines) from being bought with gift cards.  This might not seem like a huge imposition but Marks and Spencer and House of Fraser gift cards are popular choices for wedding gifts.  If the newlyweds want to buy a washing machine or dishwasher with funds gifted at their wedding, you might be better off giving cash (or John Lewis or Curry’s vouchers).

Gift card holders are low down the pecking order if a business goes bust

In 2007, Zavvi retail – which was jettisoned by Richard Branson’s Virgin Group (the stores used to be Virgin Megastores) went into administration, and the administrators decided not to honour outstanding gift cards.

A similar situation occurred with the music store HMV when they went into administration in 2013 and Jessop’s camera stores before they were bought and re-launched by the entrepreneur Peter Jones.

This needn’t be a problem if the business for which you are buying gift cards is on a solid financial footing, but may be a concern for smaller retailers, or retailers that are known to be struggling.