The Big Christmas Debate: Gift Cards or Cash? - NerdWallet UK (2024)

Giving gift cards or cash as a gift at any time is hands down a better option than buying someone something they don’t want or need. It can also make life easier if you’re short on time and inspiration. Far from a last resort, they can be a Christmas saviour for all concerned.

There is no need to be sheepish about taking either route, if it works for you. But if you’re not sure which way to go this season, our pros and cons are here to help.

The case for gifts cards

If you’re familiar with a friend or relative’s likes and hobbies – and even if you’re not – there will be a Christmas gift card for them. Over a quarter (27%) of people in the UK bought a gift card for someone in December 2021, according to a Gift Card & Voucher Association (GCVA) survey. So it is a festive go-to for plenty of us.

And as Gail Cohen, director general at the GCVA, explains: “Gift cards also help to keep Christmas special and are favoured by many people over cash for this reason. They show that you’ve given thought about what to buy that person – choosing their favourite brand, for example.”

Big retailers can be a winner with more generic spending options, but supporting smaller or niche businesses is an option too. The same GCVA research reveals that more than half of gift card recipients over the past three years have been introduced to a new brand or organisation in the process. And around 29% of gift card givers were motivated by it helping to support a small business.

If you’re not keen on being elbow to elbow with festive shoppers, or leave things until the last minute, they’re a gift for the giver, too. You can pick them up in store, or you can schedule or send the balance straight to the giftee’s inbox (saving on single-use plastic in the process).

So it’s easy to see why they remain popular, perhaps even more so right now. Cohen explains: “As we approach a cost-of-living Christmas, it’s perhaps not surprising that 80% of consumers in our recent survey said they would be happy to receive a gift card this Christmas.”

Before you go the gift card route, though, consider restrictions and time limits when it comes to where they can be redeemed and what they can be spent on. Make sure it’s a store or brand the recipient does really like or it might end up unused or, at best, being sold on a gift card marketplace.

GCVA figures show that over a quarter (26.5%) of us are put off buying gift cards because we worry they’ll expire before they are redeemed. Most gift cards come with a fairly long period to use them, but one day they will no longer be valid. So read the terms and consider mentioning it to the recipient, too.

And what happens if a retailer goes bust? The administrators decide the fate of gift cards in circulation, but gift card buyers are considered unsecured creditors and are treated as a low priority. So you’ll be lucky to get the full amount you paid back.

If you buy a gift card worth £100 or more by credit card and it’s not honoured by the retailer, you may be able to make a claim under Section 75 of the Consumer Credit Act or use the chargeback scheme if you paid with a debit card for any amount of money. But bear in mind that there are no guarantees you’ll get your money back.

Cohen advises the giftee to seize the day. “When it comes to using gift cards, our advice to consumers is to always use them as soon as possible. They are a gift to be used, not something to put in a drawer and forgotten about,” she adds.

The case for cash as a gift

There is little doubt that cash is the more straightforward choice. It can be used almost anywhere, any time. There is no clock ticking and no limit to what recipients can spend it on. And while a treat may be your intention, they could save or invest it.

And is it so bad if it ends up being used for everyday expenses when finances are tight? Post Office research suggests that four out of 10 people in the UK are worried they won’t be able to afford Christmas this year, with the cost-of-living crisis affecting the festivities for 83% of people.

Though physical cash is still alive and well, with a recent UK Finance survey revealing that 40% of consumers use it to buy something at least once a week, contactless payments and phone apps can be a more convenient way of spending. So a bank transfer of the cash could be a quick way to earmark money for a specific gift. This may feel more impersonal than pristine notes wrapped in a festive ribbon, but it might make for a more hassle-free spending experience for the recipient.

If you want to post the cash, take precautions. Royal Mail advises using Special Delivery Guaranteed to send money in the post as it offers compensation in the unlikely event of a loss.

It also recommends making sure your cash can’t be seen through the envelope and not to send coins, which can cause trouble with sorting machines. It also reminds senders to be aware that the definition of valuables includes vouchers, coupons, cheques and cards.

It’s possible to send money abroad using international tracking but there are some countries, including Italy and Poland, where you can’t send money from the UK, so always check.

Wrapping up

There is no right or wrong way to give someone a gift at Christmas. Both cash and gift cards are a savvy option if you want to reduce waste and give the recipient the flexibility to choose what they buy, and when.

And if you’re a last-minute or reluctant festive shopper whose present wrapping leaves a lot to be desired, you can’t really go wrong with either.

While cash has fewer drawbacks, there are plenty of gift card options to choose from. Just give the recipient a nudge to spend it before it expires, or the only present you’re buying will be for the retailer.

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