Planning Briefs

Should You Give Gift Cards? They May Not Be Used

Published Wednesday, June 15, 2011 at: 7:00 AM EDT

What can you get for the person who has everything? Increasingly, consumers are turning to gift cards. Gift cards are convenient, and they let recipients choose how they want to spend the money.

Yet while gift cards may seem like a good choice, very many are never used. According to a survey by Plastic Jungle, more than $30 billion worth of gift cards are gathering dust in American households. Plastic Jungle, which has a vested interest because it will buy unused cards at a discount, reports that U.S. consumers buy about $90 billion in gift cards each year, and it estimates that more than one in 20 goes unused.

Would you be better off simply giving gifts of cash? That’s often considered to be impersonal, and the money may get spent on routine expenses. If you go the gift card route, try to make sure it’s for something the recipient is likely to want. If you’re not sure, you can “gift” a pre-paid Visa or Master Card, useable for anything at any store.

Also, if you are thinking past merely giving someone a gift, a reloadable Visa or Master Card might be an effective way to help a younger person in your life “manage” their money more effectively. Cards like this can be also be used by parents to help provide subsidy budgets when and if needed for school, transportation expenses or actual gifts.

This article was written by a professional financial journalist for Preferred NY Financial Group,LLC and is not intended as legal or investment advice.

An individual retirement account (IRA) allows individuals to direct pretax incom, up to specific annual limits, toward retirements that can grow tax-deferred (no capital gains or dividend income is taxed). Individual taxpayers are allowed to contribute 100% of compensation up to a specified maximum dollar amount to their Tranditional IRA. Contributions to the Tranditional IRA may be tax-deductible depending on the taxpayer's income, tax-filling status and other factors. Taxed must be paid upon withdrawal of any deducted contributions plus earnings and on the earnings from your non-deducted contributions. Prior to age 59%, distributions may be taken for certain reasons without incurring a 10 percent penalty on earnings. None of the information in this document should be considered tax or legal advice. Please consult with your legal or tax advisor for more information concerning your individual situation.

Contributions to a Roth IRA are not tax deductible and these is no mandatory distribution age. All earnings and principal are tax free if rules and regulations are followed. Eligibility for a Roth account depends on income. Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions).