To give or not: Cash, gift cards or prepaid cards?

Who doesn’t like money? The near-universal appeal of cash has made it a popular gift for special occasions since the Lydians minted the first coins in the 7th century B.C.

But cash isn’t without its drawbacks, notes Consumer Reports. If it’s lost, it’s gone forever. It’s also a gift that tends to be forgotten almost as soon as it’s put into a wallet.

Consumers who want to give cash for the holidays should also consider gift cards and prepaid cards. Here’s what Consumer Reports recommends considering when deciding between these options.

Gift Cards

Pros. In a word: convenience. Just grab merchant cards or payment network cards (American Express, Discover, MasterCard and Visa) at a drugstore, retailer or supermarket. They can also be purchased online and sent to you or your giftee by mail or email.

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. And the merchant might not be a favorite of your intended recipient.

Security. Some issuers won’t replace a lost or stolen gift card, the Federal Trade Commission says. Others will – with proof of purchase and the card’s ID number – so give the receipt along with the card. But don’t expect to get back any value stolen before you report the loss. Scammers can also copy gift card codes while they’re still on a rack, then steal whatever money a gift-giver loads onto the card. Before you buy a gift card, inspect its protective stickers or coating for tampering.

Consumer Reports’ advice. Don’t give a merchant gift card unless you’re certain the intended recipient really loves the store. Almost $1 billion in gift cards went unspent in 2015, according to the market research firm CEB.

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). Make sure you give cards with low or no monthly fees or other user charges.

Cons. You’ll usually pay a few dollars for 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.

Security. Many issuers of prepaid cards voluntarily offer the same consumer protections against fraud loss as bank debit cards by limiting your liability to $50 if you report the unauthorized use within two days of discovering it. Prepaid cards with the MasterCard and Visa brands go further by providing zero liability. But to get those protections, you must register the card.

Consumer Reports’ advice. Three cards stood out in Consumer Reports’ ratings: Bluebird by American Express and Wal-Mart, Chase Liquid Visa and Green Dot Prepaid Visa. They were highly rated for safety (insured by the FDIC), fee accessibility and clarity. They also rated well for value (low fees).

To learn more, visit ConsumerReports.org.

2016 Consumers Union, Inc.

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