Gift cards have become one of the most popular gift choices in recent years. Also known as gift certificates or store credits, gift certificates allow recipients to choose exactly what they want within a set spending limit.

The Origins and Growth of Gift Certificates

The first modern gift certificates were introduced in the late 1980s and early 1990s by retailers like Barnes & Noble, Home Depot, and American Express. However, it was not until the mid-1990s that gift certificates truly took off in popularity. Developments like universal gift certificates that could be used at multiple stores, as well as the growth of large retail chains, helped drive broader adoption of gift certificates by consumers and merchants. By the early 2000s, gift certificates sales in the United States exceeded $100 billion annually according to industry reports. This figure has grown steadily ever since as gift certificates displace traditional presents under trees and in stockings every holiday season.

How it Work

When purchased, a Gift Card functions like a prepaid debit card that can only be spent at a designated retailer or group of retailers. The monetary value of the gift certificates is encoded on a magnetic strip on the back of the plastic card or stored digitally if the gift certificates number is provided. At the point of sale, the card is swiped or the number manually entered so the purchase amount can be deducted from the remaining balance. Lost or stolen gift certificates can generally be replaced for a small fee if the purchaser has the gift certificates number and security PIN. Unused balances also do not expire for many years, allowing recipients flexibility in when and how to spend their gift.

Benefits of Gift Cards Over Traditional Presents

One of the major appeals of gift certificates is they take the guesswork out of gift giving. No more worrying if the gift recipient will like a certain item or if it is the right size–with a gift certificates, they can choose exactly what fits their needs and tastes. Gift certificates also suit recipients of all ages, from kids to grandparents, since the spending options are tailored to the merchant. There is less waste compared to physical presents as well, since gift certificates ensure the item is something the recipient wants rather than having to re-gift or return an unwanted item. Another advantage is gift certificates free the gift giver from picking out, wrapping, and shipping a physical present each time.

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