Gift cards are wildly popular, especially around the holidays. But certain cards may end up becoming more of a hassle than they're worth.
Sue Majors, who recently received a $50 Visa e-gift card, thought it would be simple to use.
"I thought it was just a Visa card, and you could use it like a Visa card," Majors said.
To save money, she thought she’d use the gift card to grab lunch, but quickly ran into problems.
RELATED STORY | Self storage beware: Low introductory rates lead to big rent hikes
"I was told on any food purchase they withhold 20% until some later date," Majors said.
Instead of applying her $50 gift toward the meal, she was left confused.
Watch as a woman shows how frustrating a Visa gift card can be:
Watch for automatic tips
Kate Ashford with the personal finance company NerdWallet explained there are limitations to using Visa gift cards and similar products at restaurants or salons where tipping is common.
"Visa gift cards in restaurants often will only allow you to charge up to 80% of the card balance, because they're leaving you wiggle room for a tip," she said.
Ashford said some restaurants won't take prepaid cards for this reason. To avoid this issue, the platform Gift Card Granny recommends that you request the restaurant or business to process the card for 20% less than the total bill.
Majors said she couldn't use the card to pay bills either.
"I called to find out why it declined it, and they said the card is not set up to pay bills," Majors said.
Other potential downsides
In addition to the tip issue, general-use gift cards, like those offered by Visa and Mastercard, also tend to have an up-front fee. For example, a $100 Mastercard gift card from Target actually costs the buyer $106 when you add in the $6 purchase fee.
Plus, you need to know what's on the card when using it.
"If you're using them at a physical store, you have to make sure you're keeping track of the balance," Ashford said.
RELATED STORY | Costco is offering discounts on weight loss drugs, but doctors still see risks
She added that when using the gift cards online, you may also have to register your name and address before you use them.
"Some people just don't want to take that step, and then they end up not using them at all," she said.
Alternatives to general-use gift cards
If you don't know where someone shops or eats, Ashford said to go for a Visa gift card. But she said cash or store-specific cards are easier to use. Majors finally found a store to take her gift card, but said she’s sticking with her own credit cards from now on.
"I had $50 on this e-card, and I can't spend the whole thing. It always withholds some money," Majors said.
So be aware of the possible frustrations before you buy, so you don't waste your money.
________________________________
This story was reported on-air by a journalist and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy.
____________________________
"Don't Waste Your Money" is a registered trademark of Scripps Media, Inc. ("Scripps").
Follow John:
- Facebook: John Matarese Money
- Instagram: @johnmataresemoney
- X/Twitter: @JohnMatarese
For more consumer news and money saving advice, go to www.dontwasteyourmoney.com
