The Gift You Wish You Had Given
The winter holidays are over and your employees are straggling back to the office, clad in garish new sweaters, fumbling with new e-readers-;and in a quite a few instances, nursing a bad case of spenders’ remorse. You may feel some of that remorse yourself, as you reflect on how few employees seemed really to like getting figgie pudding from you again this year, or as you have second thoughts about the generous cash bonuses you handed out in a fit of foolish optimism that Washington would dodge the fiscal cliff.
So, I have a suggestion for your next holiday: Give gift cards. Your employees will appreciate them at least as much as figgie pudding, and dollar for dollar, you can sow more good will than you would with a cash bonus. Full disclosure: My company, Card Hub, runs an online gift card exchange among other things, so I am, frankly, prejudiced in favor of them. But if you decide to give plastic, there’s a right way and a wrong way to do it. That’s the point of thinking about this now.
How to get more gift for the buck
The single best way to save on gift cards is to buy them on the secondary market. Gift cards have been the most popular type of holiday present for six consecutive years, yet roughly $41 billion worth of buying power went unused from 2005 to 2011 and another $2 billion won’t be redeemed in 2012, according to TowerGroup data. That obviously works out great for Card Hub’s exchange, but it can also be good for you. You can buy gift cards at discounts of up to 80% on exchanges and present them to employees and clients without the recipients being any the wiser.
If you go with gift cards, do it right
To maximize your savings, you should:
- Favor retailers’ cards over general-purpose gift cards: While retailers book a profit the moment you purchase one of their gift cards, general-purpose issuers like Visa, American Express, and MasterCard have to charge fees to make money. Their gift cards therefore often come with inactivity fees, purchase fees, etc., which eat away at the balance you load. That’s why it’s typically most efficient to give cards from specific retailers that you have reason to think your employees enjoy.
- Use caution when redeeming rewards for gift cards: Chances are, your personal or business card offers great redemption rates when you trade in points for gift cards, thanks to deals struck between the card issuer and various retailers. That means you can often get more value by buying gift cards with points rather than with cash. However, this isn’t the case with every retailer, so do your homework on rewards redemption value.
- Pay with the right card: If you’re not going to be able to pay off your holiday expenses in full by the end of the billing period, don’t use a business credit card, as it won’t give you interest rate stability. Since you are personally liable for the debt whether you use the business card or your personal card, you might as well use the latter for the greater protection it offers against unexpected increases in interest rates.
- Watch out for scammers: Some gift card exchanges (include the one operated by Card Hub) give the option of purchasing from an individual seller or a trusted gift card depot. You may save more buying from an individual, but it’s best to meet the seller in a public place so you can call the 1-800 number on the back of the card to verify its balance.
Obviously, it’s too late now to take advantage of gift cards for the 2012 giving season. But as word filters back to you that your employees were less than thrilled by those cute coffee mugs with the heat-activated picture of you and your dog, you might give gift cards some thought for next year. That said, I’ll leave it to you. Happy New Year, and may 2013 be filled with savings and business success.
ODYSSEAS PAPADIMITRIOU is a former senior director at Capital One. He is founder and CEO of Evolution Finance, parent company to the credit card comparison website CardHub as well as WalletHub, a new personal finance social network where consumers can compare and review financial products, professionals, and institutions.
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