Why this gift is illogical

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Commentary:

(MoneyWatch) Have I got a deal for you. If you will send me $105.38, I'll send you $100. What's the catch you ask? There are a few. First, you can't use the $100 everywhere or even to pay off debt. Next, unlike your $105.38, the $100 I give you has an expiration date. Finally, you may not be able to combine the $100 I sell you with real cash. How many can I sign you up for? Remember, quantities are limited.

What I've just described is a $100 gift card currently for sale at Wal-Mart. And I don't mean to pick on Wal-Mart. They probably have the best price around if you want to buy a $100 "ubiquitous" gift card.

I don't know if it's just me but it seems a bit illogical to turn a more ubiquitous $105.38 into a slightly less ubiquitous $100. After all, by law, the $105.38 is legal tender and can't be turned down. It never expires and no one charges a fee if you use it. And while I've never conducted a survey, I'm willing to bet most people would rather receive a gift of $105.38 cash than a $100 gift card.

Illogical and thoughtless

I'm aware that gift giving isn't logical. Even I knew last week not to give my wife $100 for Valentine's Day even though she could have bought a dozen roses with it and had some funds left over. A good gift should show thoughtfulness and be something the recipient would not have otherwise bought. According to Duke Behavioral economist, Dan Ariely, "a good gift is something that someone really wants, but feels guilty buying it for themselves."

I'm not sure anyone would think I'm thoughtful for picking out the $100 gift card. I personally don't feel the card would be used to buy something more extravagant than if the gift had just been cash.

So why have sales of gift cards reached $100 billion? I haven't a clue. But hey, clue or no clue, I'm willing to one-up Wal-Mart. Send me $104 and I'll send you $100 in hard cold never expiring cash. That's a much better deal, I think.

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    Allan S. Roth is the founder of Wealth Logic, an hourly based financial planning and investment advisory firm that advises clients with portfolios ranging from $10,000 to over $50 million. The author of How a Second Grader Beats Wall Street, Roth teaches investments and behavioral finance at the University of Denver and is a frequent speaker. He is required by law to note that his columns are not meant as specific investment advice, since any advice of that sort would need to take into account such things as each reader's willingness and need to take risk. His columns will specifically avoid the foolishness of predicting the next hot stock or what the stock market will do next month.