Gift cards are the preferred Christmas gifts of 2020

Gift card purchases in the first week of December were double the rate in the same period last year, according to InMarket, a data analysis company. Gift card sales increased 48% last weekend, compared to the beginning of the week, as the deadlines for free shipping with guaranteed Christmas delivery have expired, according to Rise.ai, which manages gift card programs electronics for more than 5,000 brands, including Allbirds and Milk Bar.

Tim Maynard has already spent nearly $ 300 on gift cards this year at retailers ranging from Amazon.com Inc.

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Mark Corp.

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for Home Depot Inc.

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In recent years, the 32-year-old financial analyst said he avoided giving out cards because they seemed impersonal.

“It was kind of a last resort this year,” said the resident of St. Clair, Missouri. “Not being able to go into stores and see things makes it difficult to buy gifts.”

The gift card boom may not help Christmas sales. Retailers cannot register revenue until the cards are redeemed, according to Nathan Ehrlich, president of the Retail Gift Card Association.

Cards can boost sales next year, however, as shoppers return to stores or redeem them online. “We believe that a gift card boom will lead to a shift in spending in the first quarter of next year and beyond,” said Todd Dipaola, chief executive of InMarket.

There are two types of gift cards. So-called closed-circuit cards are issued by banks and brand merchants, including Macy’s or Amazon. They typically have no fees and do not expire, but can only be used at the retailer with your brand on the card, according to David Nelyubin, a senior research analyst at Mercator Advisory Group Inc., a payments consulting company.

Open loop cards operate on card networks, such as those executed by Mastercard Inc.

and Visa Inc.

These cards can be used anywhere these brands are accepted, but they usually reach recipients with fees. “If you don’t use the money, the fees will erode the balance,” said Nelyubin.

The best selling gift cards this year are Visa, Amazon, Microsoft Body

Xbox, Kohl’s Corp.

and Lowe’s Cos., according to InMarket.

The average buyer is spending 17.6% more on gift cards in 2020 compared to 2019, while the average number of gift card transactions per buyer has increased 12.3% compared to last year, InMarket said .

A considerable portion of gift cards are not used, allowing merchants and card issuers to later reserve some of these funds as revenue in accordance with accounting rules. Mercator estimates that traders keep about $ 3.5 billion in unredeemed balances annually.

A portion of the unused balances goes back to the states. Some states take responsibility for returning funds to consumers. In cases where the consumer cannot be located, the money goes to the state where the issuing company is domiciled, according to Ehrlich, of the gift card association.

Concerned about the increase in Covid-19 cases, Debika Sihi has stopped going to stores and is instead buying electronic gift cards for her friends and family at local stores this year.

“With UPS and FedEx under so much pressure, I’m concerned that if I send a gift in the mail, it won’t be there until Christmas,” said the 38-year-old Austin, Texas resident.

Write to Suzanne Kapner at [email protected]