Thinking about giving someone a gift card for Christmas? You are not alone. Last year, billions of dollars of gift cards were purchased in the days and weeks leading up until Christmas. In fact, Google reports that searches for "Gift Cards" continue to rise until December 26th when they finally peak. I guess some people are looking for after last-minute gift ideas.

Not long ago, Gift Cards replaced the gift certificate as the present to give to someone that either you don’t really know what to get for them, for people who are very picky (and thus better off picking out their own gift), for people you don’t want to bother shopping for, and for people on your gift list who live far away because gift cards can be shipped easily and cheaply tucked into a Christmas card.

Reports about gift card tricks and things to beware of when buying gift cards have those with savvy financial planning skills looking for unbiased financial advice about whether or not giving gift cards is a good idea. Fortunately, in most cases, giving them as presents works out just fine for everyone.

Gift Cards Losing Value

There are some concerns regarding Gift Cards, particularly around the "features" that cause them to lose some of their value over time. Fortunately, the most egregious of these terms have been pretty much weeded out by continuous news coverage and frequent sob stories regarding small children, or little old ladies whose gift cards ran down to zero value while they were unable to shop.

Even so, many gift cards continue to come with a provision that has them expire after a certain amount of time, or to slowly lose their value each month. The truth is that there is a very legitimate reason for treating gift cards this way. A gift card is a debit, or liability, for the business that issued it. Since they were already paid cash for the card, and they are obligated to redeem the card for an equal amount of goods or services, a gift card acts like an IOU on the books of a business. However, unlike other debts, the business has no way of projecting when, or if, the liability will ever come due. Carrying around $1 million worth of liabilities for gift cards issued so long ago that there aren’t very likely to ever be cashed in, is a headache for all kinds of companies. The expiration date, or the countdown value draining ticking time bomb gives the accountants an end date when they no longer have to account for the possibility that cards will be redeemed.

This is not a new practice. Gift certificates had expiration dates printed on them as well. The problem that gift cards had was that the expiration date, or the terms of use that stated when and how the gift card lost value were either printed in fine print on the back (that no one read) or, even worse, not on the card at all and part of the terms and conditions that were published elsewhere on the website or contract / agreement that one had to specifically ask for. So, when people went to use their gift cards, they were surprised, and very angry, to find out that they had lost value or expired.

Top Christmas Toys Gifts 2009

Gift Cards Very Profitable

Gift cards are very profitable for businesses. Much like mail-in rebates, a lot of gift cards are never redeemed completely. Many people who get a gift card go to the store and pick out something that costs less than the total value of the gift card, so that they can get it for "free". The remaining amount on the card is often forgotten all about. Even if the person finds the card in their wallet or drawer at a later date, they likely remember that they already used it, and just throw it away. Or, the remaining value is so small as to not make it worth the hassle. All of this unused money adds up to big profits for businesses and retailers.

The major credit card issuers have an even better deal going. By offering card redeemable anywhere MasterCard or Visa are accepted, they can sell even more cards, and they have to do even less to process and account for them. Some banks let you double dip for more credit card rewards points by giving you miles or points for the full purchase price of the gift card.

In order to not kill the golden goose of gift cards, most merchants have much kinder terms regarding their cards. They either don’t lose value over time, or lose their value much more slowly. Many cards have no reducing amount feature and just have a regular expiration date, which people tend to view more favorably.

So, if you plan to give gift cards this holiday season, there is no need to worry as long as you are buying them from a reputable merchant. After all, it is worth much more to Best Buy to keep selling gift cards for years to come than it is to screw over a bunch of people this year and get a little extra profit, but a bunch of publicity that will keep gift givers from buying their cards next time.

Being a [tag]smart consumer[/tag], or smart investor, or smart anything really is all about knowledge. Understanding the world you are playing in just makes good sense. I can spot most finance scams by reading the title. The reason? I’ve spent plenty of time reading the fine print and have grown accustomed to what fine print goes with what BLARINGINGLY GOOD TITLE!

So, without further ado, here are the Top 10 Fine Print Gotchas:

1. That’s Not It
   • One of the most common [tag]fine print[/tag] [tag]gotchas[/tag] is when the really great picture you see isn’t actually what they are talking about. For cars you’ll see a fully equipped XJT9X version in the picture when the ad is talking about the base no-options model. For others the fine print will point out that the picture is only “representative” of the product, meaning it is pretty much like that, but not just like that.
2. Rebates
   • The one I really hate these days is rebates. Electronic store ads are filled with them. A great deal on a monitor for $199? Sure, but you will pay $279 today. Then, you can get a rebate from the store (but it’s an “easy” rebate) for $40 and then you can get another rebate from the manufacturer for $40, but only if you also buy Wango Wicket Adventures (at full price.) The car guys get you here too. $199 / mo. — of course you’ll need the recent graduate rebate, and the military service rebate, and the astronaut rebate…
3. Fees
   • For this one I’d like to give a big welcome to the [tag]cell phone[/tag] companies. $39.99/mo. for 500 minutes, but (super fine print) it doesn’t include fees and taxes. The real burn here is that the fees are phony charges that get official sounding names (usually copied from real land-line phone bills.) The tipoff for this fine print gotcha is to find the words “Does not include…” Watch for it on anything where you can be charged for delivery or setup.
4. You Aren’t Just Buying One
   • $9.99 is a great deal. Too bad you will only pay that for the first one. In this fine print gotcha the price is actually the price of a subscription to buy several more full priced ones. Watch out for a purchase that requires a credit card or your billing information. If you can’t buy one for cash without giving anyone your name, then you are signing up to buy a bunch more. Look for fine print like “Purchase enrolls buyer in…”
5. It Won’t Work…Until You Buy Our Service Too
   • The fine print here will inform you that you are buying a very expensive doorstop that is until you “activate” it. Your fine print tip-offs are “must be activated…” or “requires [tag]subscription[/tag]…” or “requires service…” A cell phone is an obvious example. Others include T.V. recorders, XM radios, OnStar, and so on. Watch out because the fact that you have to buy expesnive monthly service is often hidden by a free “trial” period. Then, watch out for the next one.
6. Well It’s Free Now…We Won’t Tell You When It Isn’t
   • This one catches tons of people. An offer for a service. The service costs money. No problem, you can try it free for 90 days. The fine print? They won’t ask you if you would like to keep it for 91 days. In fact, the only way you can have the free trial is if you give us your credit card information, so we can keep billing you after you forget to cancel your free trial. I get calls all the time from people who bought cars with satellite radios. They came with a 12 month free trial. When they notice they are paying $19.99 a month for their radio they freak out. “Oh, the trial period ended,” followed by my favorite lie in all of corporate America “We did it for you.” “As a service to ensure our customers get uninterrupted service we automatically…” — Beat this one with a Savvy Credit Card Trick.
7. We Don’t Have Any…But Buy Something Else
   • Most commonly associated with Sunday ads. The super great price for the fax/phone/deep-fryer? The fine print says “Limited to Quantities in Stock” or “No Rain-Checks” followed by “In-Store Only”. You are there when the doors are unlocked Sunday morning and it’s already sold out? Oops. Stocking error. You could try the store all the way across town.
8. It’s Not A Deal At All, But We’ll Hide The Price For You
   • Common on anything that you make monthly payments for, this fine print explains that you aren’t really saving any money, instead they are charging you per month instead of upfront. The mortgage and home equity guys love this one. No Closing Costs! Fine print=closing costs financed into loan. Look for tip off words like “costs financed” or “lower rate may be availible”
9. Sorry Mr. Gates. Your Credit Isn’t Good Enough
   • Dealing with banks or lenders brings out this one. $199/mo. only if your credit score is higher than a home-schooled genius on the SATs. This one comes with fine print abbreviations “W.A.C.” means “With Approved Credit”. Guess who gets to decide if you are approved?
10. Dear Long-Term Customer, We Hate You
    • Hello, Cable and Satellite companies! Perhaps the most misguided marketing technique in recent memory. Hey, there is a great deal at my favorite shop? I love going there! I’ll go down today and get that great deal! Sorry Charlie. This deal is “For New Customers Only”. In other words, we are hoping our low price gets someone to try out our stuff so that we can charge them what we charge you later on! Most common deal right now is the $99 for phone/Internet/cable from Comcast, Qwest, AT&T, Verizon and so on. Fine print tip offs: Look for a definition of what a new customer is. “Must not have used Super Great Service in past 12 months.”

• The one I really hate these days is rebates. Electronic store ads are filled with them. A great deal on a monitor for $199? Sure, but you will pay $279 today. Then, you can get a rebate from the store (but it’s an “easy” rebate) for $40 and then you can get another rebate from the manufacturer for $40, but only if you also buy Wango Wicket Adventures (at full price.) The car guys get you here too. $199 / mo. — of course you’ll need the recent graduate rebate, and the military service rebate, and the astronaut rebate…

• The one I really hate these days is [tag]rebates[/tag]. Electronic store ads are filled with them. A great deal on a monitor for $199? Sure, but you will pay $279 today. Then, you can get a rebate from the store (but it’s an “easy” rebate) for $40 and then you can get another rebate from the manufacturer for $40, but only if you also buy Wango Wicket Adventures (at full price.) The car guys get you here too. $199 / mo. — of course you’ll need the recent graduate rebate, and the military service rebate, and the astronaut rebate…

There you go. Top 10 Fine Print Gotchas. Hope it saves you some [tag]money[/tag] and aggrevation. The trick is to always skim that small text at the bottom. Keep in mind the trick to make the first line of fine print really complicated sounding, and not very important. This is so you assume the rest isn’t important. The most important fine print is probably the lines in between the first and last fine print points, so definately make sure you read those.

Ever read a newspaper article where someone is suing a company for misleading them? The company always says something like “we disclosed all the information to the client” as their defense. Want to see it in action? Countrywide Home Loans recently sent a client some unsolicited mail (i.e. junk mail) in which they offered a No closing cot Refi! At the top in big letters on a stand-out blue background it says:

“Pay hundreds – or even thousands at closing

or PAY ZERO with Countrywide.

You Decide.”

The one page letter is filled with stuff like that including a “Reservation #” because of how special this deal is.

Guess what it says on the back on the bottom third of an otherwise blank page in 8 point font that is grey (I guess black would draw too much attention?)? “Affects pricing. With the No Clsoing Cost Option, borrowers finance the closing costs instead of paying for them at closing. Borrowers who pay closing costs at closing may qualify for a lower interest rate.”

So, I guess if they were going to tell the truth the front should say:

“Pay hundreds – or even thousands at closing

or PAY A HIGHER INTEREST RATE that could add up to thousands or tens of thousands

over the life of your loan.

You Decide.”

I guess that wouldn’t sell to well?

If you ever see or hear about a loan with no closing costs or fees, you are paying a higher rate than you would otherwise.

If you ever see or hear about a loan with a really low interest rate, you are either geting a loan with a buydown (lower interest for a very short period of time — as little as 6 months) or you are paying a LOT of closing costs.

Those are the only two ways it works.