Gift cards aren’t just for gifts anymore

Holly Israel says a gift card helped save her son’s Christmas.

She dashed to a store right before the holiday last year to fulfill her youngest son’s request so the video game of his dreams could be under the tree.

“Budgeting my money is really important,” says Israel, a single mother of four in Omaha who relies on a mobile app that sells gift cards for hundreds of businesses at a discount. “I sat in my car, bought my gift card ... and was able to go in, save a few dollars and take (the video game) on home.”

Gift cards have long come in handy during the holiday season as shoppers scramble to check names off their lists or draw a blank when trying to find a finicky relative the perfect present.

But increasingly, many shoppers are using them to stretch their budgets even as retailers count on them to bring in new customers and strengthen their bottom line.

“There has been an interesting shift in how gift cards are being used,” says George Bousis, CEO of Raise, which has the app that Israel uses. “People used to buy them as actual gifts, but now consumers are buying them for themselves, to save money on everyday purchases or things like holiday shopping.”

Americans will spend $27.63 billion on gift cards this holiday season, according to the National Retail Federation, an industry trade group. And Mercator Advisory Group projects that the amount of money pre-loaded onto cards that can be used at specific retailers will increase 2% a year through 2020, to $346 billion, up from $273 billion in 2011.

Whether it’s a piece of plastic in their wallet or is accessed digitally, gift cards often give shoppers the financial boost to their own savings that they need to buy the toaster, speaker or outfit they couldn’t afford otherwise.

“It supplements their own budget,” says Dom Morea, a senior vice president who heads Gift Solutions at First Data, which processes payments for about 6 million business locations. “A

gift card from a friend or family member at the right time brings that product or appliance into reach.”

As a result, retailers reap sales that go beyond the value of the card. A survey by First Data found the average card user will spend an additional $38 on top of the card’s pre-loaded amount.

That’s a trend that the STK steakhouse chain counts on.

“Guests are always spending over the amount that the gift cards are worth,” says Joe McHugh, regional director of marketing for The One Group which owns STK restaurants. “Gift cards usually cover part of the bill, but we see the trend that guests tend to overindulge when using a gift card.”

The steakhouses have rolled out a promotion for the holiday season, issuing $25 bonus cards for every $100 spent to purchase a regular gift card. The bonus cards must be used in the first three months of the new year.

“It’s a big part of how we grow our sales,’’ McHugh says of the cards, noting that they also introduce the restaurants to new customers, potentially growing their business.

Among those surveyed by First Data, 44% said that having a gift card led them to stop by a store that they would not have otherwise. And 53% would probably visit a store more often because of it.

Ozlem Serif, 26, an information technology professional in Hoboken, N.J., says that she tried out Zeel, an ondemand massage service, because of a gift card she got for her birthday.

Now, she’s singing Zeel’s praises. “I tell all of my friends about ... how convenient” it is, she says. “And yes, I do plan on using the service again.”

Still, there are shoppers like Israel who use the cards to buy the essentials that they personally need.

“Even if I’m only saving a dollar, that’s a dollar I’ll take,” says Israel.