In defense of gift cards

Just give 'em cash, says one angry crusader. But even plastic rip-off scams have real value

Published December 17, 2009 5:49PM (EST)

With Christmas one week away, Barry Ritholtz has gone on the warpath against gift cards at The Big Picture, employing rhetoric remarkably similar to that which he usually employs while lambasting bailout-prone politicians and greedy banksters.

Gift cards blow. The straight dope your nephews and nieces and grand kids are too nice to tell you: They hate getting them.

Why? Because they suck.

Nothing says "I am both thoughtless and inconveniencing" like a gift card. They let the recipient know that you couldn't be bothered actually picking out a present, so here is a cash equivalent -- only so much less convenient than the crisp paper kind of cash. And, you can only spend it in one place.

If you can't get them a gift, says Ritholtz, "just give them the damned cash."

Now, before I launch into a defense of gift cards, let me acknowledge that I am fully aware that they are essentially a scam. The creators of gift cards count on the fact that they will be left in drawers, or lost, or incompletely cashed out. What can you buy with that 89 cents remainder left on your card? Nothing good. When you buy a gift card for someone, you are essentially forking over some portion of the purchase price directly to the corporation selling the cards. This is sleazy and underhanded.

However, there are also efficiency gains from properly distributed gift cards. I don't buy into Joel Waldfogel's "Scroogenomics" thesis that decries winter gift-giving for its "billions of dollars in value destruction" as people give each others gifts that they don't want and don't need. But I am all too aware that a 12-year-old boy is a much better judge of what games he wants for his Nintendo DS or Xbox 360 than I am.

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.

If you gave me cash for Christmas, I'd probably save it to pay for groceries. But if you gave me a gift card redeemable at my local bike shop -- I'd be utterly delighted to splurge on new gloves.

The same goes for an iTunes gift card, or a bookstore gift card. Sure, the gift-card issuer is taking its slice off the top, but the combination of a more efficient process of gift-giving along with the direct mandate against fiscal prudence means there is real value in the present.

Maybe I'm biased because my own 12-year-old son has made it clear that he considers gift cards to game stores or bookstores acceptable and desirable. Which is not to say that he would be pleased if that's all that was under the tree on Christmas morning. That would be upsetting and disappointing. He also wants to be surprised, and enjoys having some proof that people understand him and what he wants and can demonstrate that by giving him a cool gift. I certainly would rather pull off such a magic trick than just give him a gift card. But let's not to be so quick to condemn -- and instead appreciate that almost everything has its evolutionarily useful niche, if correctly deployed.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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