Gift cards are the Christmas gifts of 2020

According to InMarket, a data analytics company, gift card purchases in the first week of December were twice as high as in the same period last year. Gift card sales are up 48% over the weekend from earlier in the week as deadlines for free shipping with guaranteed Christmas delivery have passed, according to Rise.ai, which operates electronic gift card programs for more than 5,000 brands, including Allbirds and Milk Bar. .

Tim Maynard has already spent nearly $ 300 on gift cards this year at retailers ranging from Amazon.com Inc.

AMZN -0.66%

to target Corp.

TGT 1.49%

to Home Depot Inc.

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In recent years, the 32-year-old financial analyst said he didn’t want to give the cards because they felt impersonal.

“It was kind of a last resort this year,” said the resident of St. Clair, Mo. “Because you can’t come into stores to see things, it’s hard to buy gifts.”

The gift card boom may not be conducive to Christmas sales. According to Nathan Ehrlich, president of the Retail Gift Card Association, retailers can’t register earnings until the cards are redeemed.

However, the cards could boost sales next year as customers return to stores or redeem them online. “We believe an explosion in gift cards will lead to a shift in spending in the first quarter of next year and beyond,” said Todd Dipaola, CEO of InMarket.

There are two types of gift certificates. So-called closed loop cards are issued by banks and brand stores, including Macy’s or Amazon. According to David Nelyubin, senior research analyst at Mercator Advisory Group Inc., a payment consultancy, they typically have no fees or expire, but they can only be used at the store with the brand on the card.

Open loop cards work on card networks such as Mastercard’s Inc.

and Visa Inc.

These cards can be used wherever those brands are accepted, but usually hit recipients with fees. “If you don’t use the money, the costs will eat up the balance,” Mr. Nelyubin said.

The best selling gift cards this year are Visa, Amazon, Microsoft Corps

Xbox, Kohl’s Corp.

and Lowe’s Cos., according to InMarket.

The average shopper will spend 17.6% more on gift cards in 2020 than in 2019, while the average number of gift card transactions per shopper is 12.3% higher than last year, according to InMarket.

A significant portion of the gift cards go unused, allowing merchants and card issuers to later record some of those funds as revenue under accounting rules. Mercator estimates that traders hold about $ 3.5 billion in unpaid balances annually.

Part of the unused balances will be returned to the United States. Some states take responsibility for returning the money to consumers. In cases where the consumer cannot be found, the money will go to the state where the issuing company is located, said Mr. Ehrlich of the gift card association.

Worried about the increasing Covid-19 cases, Debika Sihi has stopped going to stores and buys electronic gift cards for her friends and family from local stores this year.

“With UPS and FedEx under so much pressure, I fear if I post a gift it might not arrive before Christmas,” said the 38-year-old Austin, Texas resident.

Write to Suzanne Kapner at [email protected]