Chances are, you received a gift card as a holiday present.
Before rushing to spend it, think about how to make it work best for you. As it turns out, we can be our own worst enemy when it comes to using these payment methods.
A November study from commerce-technology firm First Data showed the average consumer spent $38 more than the value on their gift card, up $10 from 2016. In its 2017 Prepaid Consumer Insights Study, based on the responses of more than 2,000 U.S. consumers, the firm found that 44 percent of consumers visit a store they would not have visited otherwise because of a gift card, and 53 percent are likely to visit a store more often as the result of receiving one.
These results aren’t surprising, said James Roberts, professor of marketing at Baylor University’s Hankamer School of Business, and the author of “Shiny Objects: Why We Spend Money We Don’t Have in Search of Happiness We Can’t Buy.”
“We’re going to be more free with our spending when … we didn’t generate the money that’s paying for it. The fact that we’re paying with a credit card-like mechanism, (means) we’re not going to be as mindful of the price. We’ll overpay or spend more money than we would otherwise,” Roberts said.
There are some ways to be a better spender when using gift cards.
As tempting as it may be to immediately spend the card, cool it for a moment, he said.
“Wait for the newness and the excitement of having free money settle down a little bit. Look at it as if this is just like real money or cash; we should be patient,” he said.
Roberts said consider how you might want to use the gift card. If you’re looking to buy a particular item, do your research on the price. Without a reference point on a product’s price, people are likely to buy the first one they see at whatever price it is, “especially with a gift card,” he added.
Since many gift cards are store-issued, it’s possible the item you’re contemplating may be more expensive at that retailer than others. In that case, Roberts said, look for something else.
Mousumi Bose Godbole, professor of marketing at Fairfield University, said to be more mindful, think about what kind of need you want to fulfill with the card, especially if you tend to shop a little more than the average person. Ask yourself: Will this gratify a short-term need, or can I defer the purchase to satiate a need later? Am I really looking for a specific product or am I just spending money?
Put some thought behind generating a shopping list, particularly for avid shoppers. That contemplation gives you some guidance about why you want to buy an item, she said.
That doesn’t mean you can’t have fun shopping, whether online or in stores. Just remember there’s a difference between shopping, which is making an informed decision, and buying, which is spending the actual money. Shop to your heart’s content, she said, just be reflective before you slap down the card.
What if the gift card is from a store you don’t like or don’t frequent? You have a few options. Some stores may accept it as a return if you have the receipt and it’s unused. Many websites let you sell unwanted gift cards, Roberts said, but you won’t receive face value for the card, maybe only 85 to 90 percent of the value.
You could buy something for another person, Bose Godbole said. “Can this card be used for other alternatives such as helping others,” she suggested.
Another good reason to wait to use the gift card is for the final markdown sales in January, which can give shoppers a little more mileage. It’s a good compromise between wanting to use the card right away and taking some time to figure out what you might want to buy.
“If we have something in mind, maybe wait for the new year. January is a slow time for retailers, so you’re likely to find better bargains. If you wait until the new year, it will go a lot further,” Roberts said.
And take a partner or a parent with you if you have a habit of overspending, especially if that person is likely to keep you in line.
“Our research shows if we’re with our spouses or with our parents, we’re much less likely to spend in a profligate manner than when we’re by ourselves or shop with friends. Shopping with friends is like throwing fuel on the fire,” he said.