Home > Personal Finance > Here’s Why Millennials Are Buying Gift Cards for Themselves

Comments 0 Comments

Young folks have found a new use for refillable gift cards. They are buying them for themselves.

A new report issued this week by analyst firm Mercator Advisory Group found a big jump in purchase of these “retailer-specific” cards among millennials.

“Nearly 3-in-5 young adult respondents indicated they bought them during the previous year, up from less than half of young adults who did so in the 2015 survey,” the report said.

The intermingling of these gift cards and apps seems to be behind the trend.

Increases in overall retail refillable gift card sales were particularly sharp in the 18- to 24-year-old age range, which saw an increase from 44% to 53%; and among those ages 25 to 34, which jumped from 48% to 57%. The rise is even more dramatic when a three-year trend is considered — among the 18- to 34-year-old set, the jump was from 39% to 57% from 2013 to 2016. During that same stretch, gift card sales actually dropped among those over age 65, and were nearly flat for 35- to 64-year-olds.

Why the increase among young people? Gift cards aren’t just for gifts anymore. Young folks are loading gift cards onto retailer apps, and using the money on themselves, said report author Karen Augustine.

“Retailers are introducing more mobile-based apps and offers when using their loyalty and prepaid programs, which may be fueling this growth in retailer gift card purchases,” Augustine said. “Young adults continue to lead this mobile revolution and growing use of prepaid cards as a money management tool.”

The Starbucks Effect

Starbucks continues to lead the way with its coffee cash app, which is little more than a gift-card management tool with a quirky loyalty program sprinkled on top. Still, the Starbucks app is a raging success. About $1.2 billion of customer cash is now loaded on the app/gift card tool, which means Starbucks holds more cash than some banks. About one-quarter of all transactions at U.S. Starbucks stores is now conducted via app. That serves customer loyalty, and it also saves Starbucks a killing on credit card transaction fees.

Meanwhile, the Starbucks app offers a huge advantage to busy young adults — those who pay via the app can skip to the end of the line, pick up their drink, and go.

“I believe that millennials are taking advantage of the plethora of mobile apps that retailers have introduced that support their prepaid cards, and they start using more prepaid cards in general for their own use,” Augustine told me via email. “We see more prepaid cards being bought for personal use, not just for gifts.”

Other retailers, like coffee competitor Dunkin’ Donuts, have noticed Starbucks’ success, and now allow consumers to store value via gift cards on their own apps — a feature sometimes called “digitized stored value.”

“The discount retailers are doing well in this space, despite their late entry,” Augustine said. “Dunkin’ is a regional brand that we do track, but national fast food chains are popular, too.”

Plenty of Room to Grow

On the other hand, a Forrester report issued last year suggests there’s plenty of room for retail-specific apps to grow. It found that 60% of consumers who use a smartphone to shop online have fewer than two retailer-specific apps on their phone; and only 18% of app users have used that app to store gift card value.

While plenty of store apps let users check gift card balances, or even buy and send gift cards, a study by RSR Research called the Digital Gifting Benchmark Study found that few popular apps complete the cycle and let consumers store and spend money via the app.

“Too many retailers still offer no option to buy gift cards via mobile web or app,” the report said. Only 12 out of 100 retailers studied allowed consumers to load a gift card into their app.

The study showed Sephora, Starbucks, Dunkin’ Donuts, Home Depot, and Amazon as the retailers with the best digital gift card experience.

Prepaid refillable gift cards can be a great way to gift people, not just yourself, but they won’t help if you need to improve your credit scores as cardholder use is not typically reported to the credit reporting agencies.

If you’re looking to build credit but don’t think you’ll qualify for a traditional credit card, you may want to consider a secured credit card, which requires a cash collateral deposit that serves as a credit line for the account. (You can see where your credit currently stands by viewing your two free credit scores each month on Credit.com.)

Image: Geber86

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team