Electronic gift cards are surging in popularity, especially among millennials as the options to personalize have increased.
Since 2010, 59 percent of gift cards are now available electronically, up 18 percentage points from four years ago, according to a new Bankrate.com report. Bankrate.com analyzed the terms and conditions of 62 widely-held gift cards in October 2014.
The increase in the availability of electronic gift cards translates into good news for millennials since they are more than twice as likely to lose traditional plastic gift cards than older adults, with 40 percent of 18-29 year-olds admitting to losing one. Mobile gift card usage among millennials is double that of older adults.
"There are lots of reasons why electronic gift cards appeal to customers," said Jeanine Skowronski, Bankrate.com credit card analyst. "For starters, they're a quick fix for anyone who needs a gift on the fly. Second, unlike their plastic counterparts, they don't take up excess real estate in your wallet. Though it may seem counterintuitive, a digital gift card can be easily personalized."
While various age groups disagree on traditional versus electronic gift card usage, millennials, Generation X and Boomers all prefer general purpose gift cards over cards that must be used at a particular store. Unfortunately, general purpose cards charge higher fees.
All seven of the widely-held general-purpose cards that Bankrate surveyed charge purchase fees ranging from $3.95 to $6.95, whereas only 7 percent of store-specific cards charge purchase fees.
"The fees are high, but gift cards are a really quick and easy purchase for gifts," she said. "You are giving people a choice, and that appeals to them."
A whopping 84 percent of Americans have received a gift card and 72 percent have given one. The most common value is between $25 and $50.
"If you are on a budget, be aware of the amount on the gift card," Skowronski said. "Don't use it as an excuse to overspend."
Electronic gift cards are becoming more commonplace. PayPal now allows consumers to send gift cards online, said Pablo Rodriguez, head of global consumer initiatives at PayPal.
"Shoppers can choose from a variety of merchants as well as send, save and check their balances all from their digital wallet online so there is no more hassle dealing with lost gift cards," he said.
Shoppers are overwhelmingly choosing to go online to purchase gift cards. Online purchases of gift cards increased substantially from 26 percent in 2013 to 34 percent in 2014, while on-premise purchases in store, at restaurant or entertainment locations decreased dramatically from 51 percent in 2013 to just 44 percent in 2014, according to a recent First Data study. Purchases of gift cards using a social networking site such as Facebook increased from 8 percent in 2013 to 13 percent in 2014. The percentage of respondents using an app was 13 percent.
Purchasing gift cards from your smart phone is also gaining in popularity, with 55 percent of consumers interested in using an app to store gift card information on their mobile phone and 58 percent of respondents would prefer to use one app to store multiple merchant cards, the survey found.