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Good Question: Are Gift Cards The Perfect Gift?

MINNEAPOLIS (WCCO) -- More than 80 percent of Americans are expected to buy gift cards this holiday season. According to the National Retail Federation, it's been the most requested gift item for eight years in a row.

So, are gift cards the perfect gift?

When the National Retail Federation asks people why they buy gift cards, the top answers relate to ease, speed, letting a recipient chose their own gift and helping the buyer stay within budget.

"You're giving them to chance to buy what they want instead of guessing," said one shopper at Rosedale Mall.

Joel Waldfogel, author of "Scroogenomics: Why You Shouldn't Buy Presents for the Holidays", says gift cards are a good gift when you don't know what to get.

"The perfect gift is something that would really delight the recipient, but when you have no idea what to do, a gift card is a pretty good gift," he said.

As a professor economics at the Carlson School of Management, he's researched how much people value the gifts other people give them.

"The basic problem is when other people make choices, they don't necessarily do a good job," he says. "Think about grandparents and aunts and uncles, they're not bad at giving gifts, it's just they don't see you as often."

Here's the thing: If you spend $100 on something for yourself, it's probably worth $100 to you. But Waldfogel's research has found, on average, people value the gifts they receive at about 20 percent less than the amount we've spent.

"If you think about gift-giving as a way of allocating resources, then we're going to miss out on some usefulness if we allocate resources through gift-giving," he says.

Stores really like when customers buy gift cards. According to CEB's 2014 Gift Card survey, 65 percent of users spend more than the value of the cards. They also estimate $1 B of gift card value went unredeemed last year.

Waldfogel says what complicates the gift card discussion is the joy people get from giving and getting stuff.

"Now the question is: Can we get joy if we give a gift card or cash?" he says.


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