Forget Gift Cards Next Time -- I'll Take Cash

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It's already February, and I still haven't redeemed many of my family's holiday gift cards.

In fact, families like mine are one reason for retailers' January slump.

Last week, Wal-Mart (WMT) blamed slow gift-card redemptions as one cause for its measly 0.5% increase in January same-store sales, or sales at stores open at least a year, when excluding fuel sales.

A lag in gift card redemptions is affecting retailers across the board this year, according to Brian Riley, senior analyst with TowerGroup, a financial-services research firm in Needham, Mass.

Gift card redemptions typically surge during after-Christmas sales, and then again in January. But this January's surge is not as strong as last year's, he says. Retailers don't count gift cards as revenue until consumers use them, because many states consider cards that aren't ultimately redeemed as unclaimed property.

I have a simple solution to help stimulate the economy.

Next time, give cash.

My husband, Ben, insists that cash is king when it comes to gifts -- even to the annoyance of some relatives, who think cash gifts lack imagination and even border on gauche.

Riley, of TowerGroup, says gift cards that languish in a kitchen drawer for more than three months often remain unused for even longer.

I ask: Who would leave cash sitting around unspent?

Wal-Mart also revealed a disturbing trend -- many consumers are redeeming cards for food, instead of plasma televisions. That's a sign, says Riley, of hard times and tight budgets. But if people choose to spend their cards on toilet paper in the current economic atmosphere, then cash works just as well.

I also think there's more to this picture than the economy.

Gift cards are now so ubiquitous that they're supplanting other payment forms such as cash and credit. Major retailers routinely offer cards at their checkouts. The cards even dangle from kiosks in local supermarkets.

This year, 12.3% of Valentine's Day shoppers plan to buy gift cards for their sweethearts, up 1% from last year, according to a National Retail Federation (NRF) survey. The organization also projected record gift-card sales during the 2007 holidays, with consumers spending an estimated $26.3 billion.

And this all makes gift cards far more common and less meaningful than they were before their surge in popularity.

Redeeming gift cards quickly -- even for food -- means consumers are less likely to hoard them. I wouldn't think twice about using a Wal-Mart gift card for food -- or any so-called "open-ended" gift card -- such as those from Visa or American Express(AXP), that consumers can redeem in almost any venue.

Using a gift card to pay for consumables that I'm certain my family will use also frees up cash in my checking account. That's money I can use for dinner out or an item from another store. The gift card still enhances my bottom line, so what's the difference if I use it at the pump or for a matinee?

Our purchase-driven society also can't escape the fact that buying just isn't the special event it used to be. Consumers had racked up $943.5 billion in outstanding revolving credit-card debt by the end of last year -- proof that many of us buy gifts for our families and ourselves all year round.

There's little motivation to run out and use a gift card tomorrow if we just bought suits at the mall last week.

And finally, I'm put off by consumer hassles. Who doesn't enjoy a nice shopping spree on occasion? But I've had some tough luck during my recent shopping experiences due to some retailers' lack of inventory. When that happens, I'm more inclined to stay home, even when my wallet is padded with gift-card money.

Recently, I couldn't find items I wanted at a local Best Buy (BBY)and Dick's Sporting Goods(DKS). I even had trouble redeeming a gift card online at AnnTaylor's(ANN) Web site. The retailer emailed after I "completed" my order to say the pants I wanted were no longer available. I used my gift card money to buy other items that weren't my top picks -- just so I could redeem the cards.

We'll get around to spending our remaining gift card stash as opportunities for springtime clothes and summertime reading arise in coming months.

Most cash gifts, however, would have flown into retailers' coffers by now, making January revenues far more palatable.

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