Why You Should Ditch the Gift Card This Holiday Season

Don’t fall for the gift card trap

The holidays will be here before you know it. While you’re out shopping, you’ll probably see a variety of gift cards on display in the checkout area. These cards, sometimes referred to as gift certificates, may seem like the perfect solution for someone on your list you’re struggling to find a gift for. But when it comes to these pre-loaded cards, the best gifts don’t come in the smallest packages (or in this case, enclosed within a paper sleeve).

What people don’t know about gift cards…

They hold onto the money, even if it’s not used

While it might be tempting to snag some cards and call your giving a day, you can spend your gift money much smarter.

Here’s the thing: buying a gift card is basically the same thing as giving a business an interest-free loan (that’s not FDIC/NCUA insured) until a purchase is made. You’d be surprised how many gift cards don’t even get used—more on that later.

Unfortunately, it doesn’t stop after the gift card is used. We’ve all gone to check out with a gift card and there’s something leftover… because rarely is a purchase an even dollar amount without any change. The remainder of that dollar is then trapped in the card, and there’s no way to get it out. The money goes to waste for you and your loved one. -1 point for you, +1 point for the corporation’s balance sheet.

They have limitations

Depending on the type of card you choose, there is a range of funds you can load on the card. But there is always a minimum, putting constraints on how much you must spend. Where the recipient can use the funds is also quite limited. Most gift cards can only be used at a certain store, restaurant, etc. If you pick a place the person on your list doesn’t like, it will simply sit there and collect dust. Even cards that are general use, marketed as basically a debit card, are a hassle to use online (sometimes unusable) if the funds don’t match up exactly since many sites won’t allow you to use a gift card with another form of payment. What’s more is that there often isn’t a great way to check your balance.

They are actually worth less as time goes on

Did you know that in some states gift cards can be subject to inactivity fees? Rest assured, Michigan isn’t one of them, but if a loved one lives out of state, the card could be subject to fees if not used within the first 12 months. The funds will whittle down and potentially drain your gift to zero. That is another negative point to your score vs. the corporation (who continues to benefit).

What’s more, all gift cards are impacted by inflation, meaning that the funds you put on the gift card today won’t go as far in the coming months.

There’s also the possibility for a gift card to become completely worthless if the company tied to it goes out of business.

They make you spend more

In fact, consumers often need to split payments between gift cards and another form of payment (if that is allowed). Research by Capital One showed that 61% of people spend more than the gift card is worth, averaging $31.75 above and beyond the value of the card!

The shocking stats

Remember how we mentioned that many gift cards are never used? Don’t just take our word for it:

Up to 20% of gift cards funds go unspent 

That results in billions each year of unspent revenue for businesses. The unredeemed funds from gift cards are called “breakage” and businesses get to keep these funds as profit. There is no way to get those funds back other than spending every last cent within the limits of what the card can purchase. According to CNN, Americans have a collective of $21 billion in unspent gift cards as of 2023.

Another way to look at it: 1 in 5 people don’t use their gift card balance. Below are common reasons why.

• They simply forget to use them. Statista found that a third of gift card holders in the U.S. admitted to forgetting about their gift cards entirely in 2024. 
• The card got lost or expired. The same Statista findings reported that one in five people’s card expired before they even tried to use it. It’s also common for cards to get lost or damaged.
• The amount leftover from other purchases is small. Many people find their purchases to be just under the gift card amount, and since those funds are trapped, they think it isn’t worth trying to spend. 
• Options are limited. Again, many gift cards are tied to a specific store, or sometimes a restaurant. If there isn’t a location close by, suddenly the convenience is gone.

What gift to give instead

What if we told you there was a better way to gift funds to a loved one,without the limitations of a gift card?

Make their season and their future bright by opening a High Yield Savings account on their behalf. All it takes is $5 to get started!

The best part is that once you start the account, the money you put in will grow over time. These accounts are just as safe as a standard, typical savings account, but with a boosted 10% APY*. Talk about a gift that keeps on giving!

As the funds grow, your loved one can withdraw small amounts for various purchases or continue to let it build and build to ignite their wildest dreams.The possibilities are endless. And with no upkeep fees—none of the funds will be lost to the gift card graveyard! Now that’s what we call holiday cheer!

***APY = Annual Percentage Yield. Rate offered may change at any time. The minimum balance to open the account is $5.00. The 10.00% APY is earned on balances of $.01 to $2,000.00. Balances of $2,000.01 and above earn an APY of 0.10%. Fees could reduce earnings. Offer valid for new high yield savings accounts opened 10/27/2025 through 11/28/2025. 10.00% APY up to $2,000 balance in effect through 12/31/2026. Existing accounts opened before 10/27/2025 will earn 10% on first $1,000. Federally insured by NCUA.