Why I'm Giving the 'Ultimate Gift Card'

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Is cash the most 'efficient' gift?

I like gift cards. Whatever the gift-receiving occasion may be, I'd much rather receive a card I could use to buy what I want over, say, an ugly sweater. I'm obviously not alone, as $131 billion in gift cards are projected to be sold this year, according to CardHub.com. Keeping that in mind, I set out to buy a few gift cards for colleagues.

Though I'm a fan of gift cards, I'm not a fan of store-specific cards. I don't always know where people like to shop or eat, and it's pretty much impossible to spend the exact amount of the card. That means people either have to leave some funds unused or spend some of their own money to buy something.

Off I went to my local Walmart to buy some $100 Visa cards that could be used at many places. For $105.95, I could buy a $100 Visa gift card.

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While waiting in line, however, I began to remember problems I've had with these types of gift cards in the past, such as the registration not working, the card being declined at the store or it simply being forgotten in a wallet or drawer.

I then decided a better idea would be to buy what I call the "ultimate gift card," otherwise known as cash. I went to my local bank and bought five crisp $100 bills for exactly $100 each. The bank even gave me nice "Season's Greetings" envelopes.

In addition to the $5.95 savings for each gift, my ultimate gift card provides the following advantages over many other gift cards:

1. No registration or setting of a PIN is required.
   
2. More ubiquitous than any other gift card.
   
3. No worries about fraud, such as someone stealing a number and using some of the funds once the card is activated.
   
4. The issuer — the U.S. government — is far less likely to go bankrupt.
   
5. No expiration date.

Logical but thoughtless?

I'm actually not quite as clueless as I might seem. I understand that gift giving isn't necessarily logical. Even I would know not to give my wife a $100 bill on Valentine's Day instead of flowers.

Dan Ariely, a Duke University professor and leader in the field of behavioral economics, says a real gift is helping people do something they wouldn't do for themselves. But he agrees that giving a form of money that is more expensive and harder to use than cash makes no sense.

Though I understand that thought and consideration should go into selecting a gift for someone, I don't see a generic (used anywhere credit cards are taken) gift card as being any more thoughtful than cold hard cash. Yet, for some reason, there is stigma associated with gifting cash.

So maybe I can rebrand cash as the "ultimate gift card" and give it a little pizzazz. I could even start a new business, undercutting the price of American Express, MasterCard and Visa gift cards. Unfortunately, that business already exists: It's called a bank.

Author's note: If you are thinking of buying or have received a gift card, check out these good gift-card tips.

Allan Roth is a financial planner based in Colorado Springs, Colo. He writes a weekly online personal finance column for AARP.org.