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Consumer Reports weighs in on gift cards, prepaid cards for holiday season

Friday, October 28, 2016 — 12:17:28 (EDT)

Yonkers, N.Y., Oct. 27, 2016 -- ’Tis almost the season to be jolly. No doubt the most eager shoppers may have already begun hunting for the perfect gifts for friends and family. For many, the simple gift of cash can save a lot of time, but cash can have its drawbacks too, says Consumer Reports in the 2016 Holiday Gift Guide.

For many consumers, gift cards and prepaid cards will be alternatives to giving cash this holiday season. In weighing the pros and cons, Consumer Reports found that some gift cards and prepaid cards are almost as widely accepted and can come with some benefits that cash lacks. That’s not to say they don’t also have their drawbacks as well.

As convenient as gift cards and prepaid cards can be — widely available from supermarkets to drugstores to online retailers — they sometimes come at a price, and that doesn’t just mean the purchase price.

“Gift cards may be the perfect solution when you just don't know what to get. But before you buy, read the fine print for fees and restrictions on when and where the card can be used. Try to avoid giving a merchant gift card unless you’re certain the intended recipient really loves the store or restaurant,” says Jeff Blyskal, Consumer Reports Senior Editor.

Consumer Reports 2016 Holiday Gift Guide weighs the pros and cons of leaving cash behind for holiday gifting and what to consider when exploring the options of gift cards and prepaid cards. The full article is available at CR.org, or on newsstands in the December Issue.

Gift cards pros: It’s convenient to grab a merchant card or payment network card (American Express, Discover, MasterCard, and Visa) at a drugstore, retailer, or supermarket. They can also be purchased online and sent by mail.

Gift cards cons: Merchant cards can be used only at the walk-in or online store of the issuing retailer. If the company goes out of business, the recipient might not get the full value of the card, or it might become worthless. If you’re sending a gift card to someone in a different region of the U.S. or overseas, there might be few convenient store locations (or none). There might be a small fee to buy and activate network cards.

Prepaid cards pros: Prepaid cards can be used wherever merchants accept American Express (3.4 million locations in the U.S.) or MasterCard and Visa (12 million U.S. locations). Also, the recipient can add money to a card and continue using it to pay for purchases. (The cards are also a good money-management tool.)

Prepaid cards cons: There is usually a small fee for buying a prepaid card at a store or online. And not all prepaid cards are a good deal. Some have fees that can eat up the balance. When CR rated 20 prepaid cards earlier this year, only about half of them were recommended.

The “Show Me the Money” story is published in the December issue of Consumer Reports and available free online at CR.org. You can also see the full 2016 Holiday Gift Guide for other options this season.

About Consumer Reports Consumer Reports is the world’s largest and most trusted nonprofit consumer organization, working to improve the lives of consumers by driving marketplace change. Founded in 1936, Consumer Reports has achieved substantial gains for consumers on food and product safety, financial reform, health reform, and many other issues. The organization has advanced important policies to prohibit predatory lending practices, combat dangerous toxins in food, and cut hospital-acquired infections. Consumer Reports tests and rates thousands of products and services in its 50-plus labs, state-of-the-art auto test center, and consumer research center. It also works to enact pro-consumer laws and regulations in Washington, D.C., in statehouses, and in the marketplace. An independent nonprofit, Consumer Reports accepts no advertising, payment, or other support from the companies that create the products it evaluates.

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Source: Company press release.