Should we still be giving gift cards this Christmas?

Gift card begin handed over Image copyright Getty Images
Image caption We spend £6bn a year on gift cards, but fail to spend £300m - that's 5% - of that before they expire

As shoppers on High Streets across the UK grapple with Christmas shopping this weekend, many of us unable to think of a suitable present will turn to gift cards.

Indeed, four out of five of us spend more on gift cards and vouchers than we do on actual presents, according to the UK Gift Card & Voucher Association (UKGCVA), the trade body for an industry worth some £6bn a year.

True, buying a gift card does show at least more thought than just stuffing some banknotes in an envelope but it comes with a drawback. Cards generally expire after two years and we throw away £300m a year on out-of-date cards.

Besides forgetting to spend the gift card or voucher there's an additional risk. If the retailer we buy a gift card from goes bust, any unspent money on gift cards could then be lost.

Despite these potential drawbacks, they are increasingly popular. Spending on all types of gift cards rose 6.6% in 2017, with digital cards and e-vouchers now making up 9.4% of the overall market.

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Image caption House of Fraser gift card holders had to wait months before getting replacement e-vouchers

In August, House of Fraser became the latest High Street name to buckle, due to a combination of tougher internet competition and rising rent bills for its stores.

Customers who'd bought gift cards were left waiting in limbo for several months after it went into administration and was bought by Mike Ashley's Sports Direct.

House of Fraser had asked customers to send in their cards and indicated that they would be replaced - but provided few details. It wasn't actually until October that gift card holders were told they would get e-vouchers of the same value that could be spent online.

It is a familiar story: the collapse of High Street stores such as Evans Cycles, Toys R Us, Maplin and HMV in some cases left shoppers struggling to get refunds or having to accept their gift cards were now worthless.

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Image caption Toys R Us was the UK's biggest toy retailer - until it went into administration earlier this year

Sarah Pennells, the founder of consumer finance website Savvy Woman, says shoppers should think twice before buying them as presents.

"They may be convenient and feel a bit nicer than giving cash but the person you give them to could be left with a worthless present if the shop goes bust.

"We've had a number of big retailers go under in recent years and with conditions on the High Street being so difficult, there are likely to be more."

One of the more persistent issues with cards is working out how long you've got to use them. Usually it is two years, but each store has its own rules for its cards or vouchers, and they are not always obvious.

There have been calls to standardise the rules to ensure greater clarity on expiry dates. The US already has a blanket minimum five-year expiry date for gift cards, and Ireland is planning to do the same.

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Image caption Gift cards in the US have a five-year expiry date

Over here, the SNP's consumer affairs spokesperson, Patricia Gibson, has been campaigning to bring in a minimum expiration period of five years to protect consumers.

"This is just common sense to me. If the US, the cradle of capitalism, can do it, there's no reason why we can't do it," she says.

"People spend their hard-earned money, and because this money is unspent it is clawed back as a firm's profit. It's not good enough - it's a pretty raw deal for the consumer. This tends to be a seasonal story though it shouldn't be - it affects shoppers all year round."

The UKGCVA says 98.5% of gift cards are redeemed within a year and that 95.4% of customers are aware of their card's expiry date - but does recommend shoppers double check the expiry date, and keep receipts separately so if you lose the card you can claim the money back.

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Image caption If you are given a gift card this Christmas make sure to check the expiry date

Sarah Pennells says if you're given a gift card as a present this Christmas you should register it so that you can get a new card if yours is lost or stolen.

"If you don't register it and don't know the card's number you may lose any money on it."

If you are buying a gift card or voucher, one other tip is to do this using a credit card. This is because section 75 of the Consumer Credit Act can make credit card providers jointly liable for breaches of contract with a trader when you buy with a credit card.

But to qualify for a claim, your gift card has to be worth more than £100 and bought using a credit card. And if you received it as a present, you will have to contact the giver to get them to chase the cash.

Follow Tim Bowler on twitter: @timbowlerbbc