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Why the Hottest Gift of 2012 Is a Gift Card

Kimberly Palmer

Gift cards will be more popular than ever this year, thanks largely to rule changes that make them more consumer-friendly. Still, gift givers, and recipients, should be aware of some key differences between various types of cards.

[Read: Why Holiday Shoppers Are Starting Early This Year.]

The National Retail Federation reports that just over 8 in 10 shoppers will buy one or more gift cards this year, and on average, shoppers will spend $156.86 on cards--the highest amount ever recorded by NRF's survey. That makes gift cards a $28.79 billion industry. The majority of people surveyed (about 6 in 10) say they're happy to receive gift cards, too. The most popular gift cards are for coffee shops, department stores, book stores, and restaurants.

But not all gift cards are created equal. While the 2009 CARD Act limits inactivity fees and expiration dates on cards, a recent survey by found that bank- and credit card-issued gift cards are more likely to charge fees, including purchase fees, than store-branded gift cards. Just five out of 55 store-branded gift cards surveyed charged a purchase fee, while all eight general purpose cards from banks and credit charged them. The fees, which are paid by the purchaser of the card, ranged from about $3 to $7.

Bank and credit card-issued gift cards were also more likely to charge monthly maintenance fees if the card isn't used after one year. (Three in four bank- and credit-card issued gift cards charged these types of fees, compared to just 2 percent of store-branded cards.) Of course, the bank- and credit card-issued cards are also more flexible, since recipients can spend them almost anywhere, and aren't limited to one specific store.

Overall, says Janna Herron, credit card analyst, gift cards are becoming increasingly convenient for consumers. "The CARD Act covered many of the 'gotchas' of gift cards," she says, noting that federal law now requires gift cards to stay open for five years, making expiration dates less of a concern. (Promotional gift cards offered through discount sites, on the other hand, don't have to adhere to that rule.)

[Read: New and Improved Layaway Returns to Stores.]

If you're planning on giving (or receiving) gift cards this year, here are five tips to keep in mind:

1. Use them or lose them. Even the most consumer-friendly rules can't protect shoppers from their own forgetfulness. If a gift card stays tucked away in a drawer forever, it's not doing anyone any good. Although most cards don't expire, a few do after five years, and there's always the chance the retailer will go out of business.

2. Take advantage of extra security perks. found that two out of three gift-card issuers replace cards if they are lost or stolen--a perk that doesn't come with cash gifts. In some cases, recipients will need to register cards to get that benefit, so be sure to read the fine print that comes with the cards and take any necessary steps.

3. Know where your recipient likes to shop. Since store-branded cards tend to come with fewer fees than bank or credit card-branded ones, gift-card givers can save money by purchasing store-specific cards--as long as they know the shopping habits of the person they are gifting. In other words, Starbucks cards are good for coffee junkies and Target gift cards work well for frugalistas.

4. Read the fine print. Since card fees vary, purchases and recipients should check out the specifics that come with each card. That way, you can more easily avoid any fees and other unpleasant surprises.

[Read: 5 Tips for Hassle-Free Gift Returns.]

5. Look out for mobile gift cards coming soon. While a handful of retailers, including Starbucks, make it easy to upload gift cards to smart phones for more convenient payments, the trend has yet to take off in a major way. Herron says many retailers are still waiting to see how the technology develops before committing to any upgrades.

Do you plan to use gift cards this year? Would you be happy to receive them as presents?

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