Gift Cards explained – Part 1

gift_cards_01

What are Gift Cards?

They are everywhere: supermarkets, drug stores, shopping centers, the internet. It doesn’t matter what retailer, you can get gift cards for almost everything.

Gift cards are prepaid cards that can be used against almost any purchase in the chain that emitted it. You can find gift cards for cinemas, restaurants, toy stores, supermarkets, online stores, department stores, museums, and the list goes on and on. Sometimes even a shopping centre can emit gift cards, and then you can use it in any store found there.

The idea of gift cards came from that everlasting dilemma about, well, gifting. When you don’t know what to get for that work colleague or even your mom, you can get them a card and they will choose their gift themselves. Yet, many people use them as a way to save some money, and here is where things become interesting.

They can come with a printed value on them ($5, $20, $50, the sky’s the limit) or you can charge them at the moment of purchase with the amount you want. You pay this value and voilĂ : whoever gets the card can redeem this value in store.

Who pays the taxes for a gift card?

One question that always comes to mind here in Canada is: and what about the taxes? We are ALWAYS worried about the taxes… There is both good and bad news here. The good one is: when you buy a Gift Card you do not pay any taxes. Yay! The bad news is: who uses the gift card pays the taxes.

When you buy a gift card, you pay the exact amount printed on it (if you are paying full price, I mean. And you don’t want to pay full price, right?) Always check your receipts when buying one! If your receipt includes the taxes, speak it up: it’s WRONG!

The person that uses the gift card will pay the taxes, but they can be paid with the card balance. So, for example, if you buy your mom a $100 card, you will pay exactly $100 for it. Your mom will then head to the store and pick up her gifts — she cannot get $100 worth of items because she has to pay the taxes. But if she ends up choosing a $50 butter mixer, the value to be debited from the gift card will be $57.50 (here in Quebec we pay roughly 15% in taxes = $50+15%). She will leave the store with a butter mixer and a card with a $42.50 balance.

How to save money with Gift Cards

It’s not rare that stores promote deals involving gift cards, especially around the holidays (Black Friday, Cyber Monday, Boxing Day…) like selling $100 value cards for $75. If it is from a store you usually buy from or is planning on spending some money there, these deals can help you save. Check the “best before date” and remember: sometimes stores and chains go out of business. In both cases there is nothing you can do and you are just losing money.

Cineplex Gift Card

Buy a Gift Card, get the same value in gifts!

In the image above Cineplex is giving you a $40 value “gift bundle” when you buy a $40 value Gift Card. This means that with $40 you get $80 worth of goodies! Not bad AT ALL!

Buying them in packs can save you money, too. Some brands will sell four $25 gift cards for less than the sum of $100, for example. It’s a great way to get a discount when the retailer has no deal going on. And if you pay for them using your cash-back credit card you are getting even more for what you pay (we will discuss credit cards in another opportunity).

In the next post I’ll tell you what you can do if you receive a gift card. Did you know that spending it is not your only option? Stay tuned!


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