TORONTO - Canadian shoppers should think twice about buying gift cards despite new laws that limit the worst abuses, consumer groups caution.
Portrayed as an easy solution to the annual gift-giving dilemma, demand for gift cards has soared since retailers began replacing paper gift certificates with plastic credit-card-like cards.
But the publishers of Consumer Reports magazine say that more than a quarter of gift cards bought in the U.S. last year were never redeemed.
The study says failure to use the cards cost consumers roughly US$8 billion.
The Consumers Association of Canada echoed the concerns about the value of the cards.
But several Canadian retailers say the U.S. figures seem way out of whack and that redemption rates are in fact quite high.
"Our redemption rates are actually very high so the figure from Consumer Reports is not even close to ours," said Lisa Gibson, a spokeswoman for Canadian Tire Corp.
"We have traditionally strong redemption rates because everyone can find something for themselves in our stores," said Kevin Groh, spokesman for Wal-Mart Canada Corp.
Other retailers said they expect gift cards to continue to be popular this year, especially now that some provinces have banned the two biggest causes of consumer complaints: expiry dates and service fees that diminished their value before they were spent.
National retailer Sears Canada Inc. said it has eliminated expiry dates and fees in all provinces, even though the ban officially applies only to Ontario and Manitoba.
"We see gift cards as an important part of what we do," said Sears spokesman Vince Power.
But the Canadian consumers' association said gift cards remain fraught with problems.
"We've always said you shouldn't touch them with a 40-foot pole. There have just been so many pitfalls with them," association president Bruce Cran said in a telephone interview.
While the bans on expiry dates and fees have eliminated the worst abuses, Cran said, the association still gets 20 to 30 complaints a month about gift cards, mostly from people stuck with cards for stores that went out of business before they could redeem them.
"There's nothing you can do about that," Cran noted.
Despite such irritations, gift cards have been growing in popularity. In Canada, some 40 per cent of adults received at least one last Christmas, according to market research firm NPD Group Canada Inc.
They account for $1.26 billion worth of holiday spending, NPD also said in a report earlier this year. However, as many as 40 per cent of those cards had not been redeemed by the end of March. The study did not look at what happened to those cards later in the year.
Consumer Reports said the percentage of U.S. cards that aren't redeemed is rising. Some 27 per cent were not cashed in last year, compared to 19 per cent a year earlier.
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