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5 Gift Cards to Avoid for Holiday Shopping

Stocks in this article: AAP SHLD ZLC RSH

Updated 11:02 a.m. NEW YORK ( MainStreet) -- Gift cards are a great holiday present only if the stores issuing them stay solvent long enough for customers to redeem them.

American holiday shoppers increased gift card spending from $139.91 per person in 2009 to $145.61 last year, according to the National Retail Federation. That's still less than the $147.33 spent on gift cards in 2008 and well below the $156.24 spent at gift cards' peak in 2007 -- when they were a nice throw-in with a bottle of wine or a gift basket and not an expendable holiday expenditure -- but at $41.50 a card for roughly 3.5 cards, that's still a nice holiday haul.

This year, the NRF and BIGResearch expect holiday shoppers to spend $155.43 per person on gift cards, or $27.8 billion in total. Not only will more shoppers (80.2%) spring for gift cards than they did in 2010 (77.3%), but the $43.28 they'll spend per card is a nice bump for the average recipient. Of those giving gift cards, 46.4% do so because it put the gift decision squarely in the wallet of the person getting the card.

That's assuming the card doesn't become a really expensive eggnog coaster by the next holiday season. Anyone who found a Borders Books and Music gift card stuffed into his or her stocking last year is out of luck if that card was sitting in a drawer while the company liquidated. Did you get a Blockbuster gift card last year? That's nice, if your local Blockbuster outlet wasn't one of the thousands closed during the company's bankruptcy and subsequent sale to Dish Network (DISH) this year. At least Circuit City cards were a holiday decor-appropriate red when that retailer went under in 2009.

Despite that retail market misfortune and the fact that those less likely to buy gift cards this year think they seem impersonal (26.1%) or worry about fees or expiration dates ($17.8). holiday shoppers are still confident in their card purchases. Thanks to the CARD Act that went into effect last year, gift cards only became a more precious commodity when their issuers were prevented from charging a fee on those cards for 12 months and allowing cards to expire until at least five years after purchase.

It's part of the reason the percentage of consumers who told the NRF that they want gift cards as a holiday present has risen from 50.2% in 2004 to 57.7% this year. That makes gift cards the most popular option for the fifth consecutive year, ahead of the clothing and accessories sought by 50% of shoppers. They're also proving more resilient than former favorites such as books, CDs, DVDs, videos and video games, which were on the wish lists of a market-leading 55.5% of consumers in 2005 but were what only 44% of consumers were looking for in stockings and under the tree last year.

To protect holiday shoppers' investments and prevent them from giving presents that may amount to nothing next year, we've looked at the financial well-being of gift-card-giving retailers and came up with five cards holiday consumers might want to avoid this season:

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