Gift Cards are Weapons of Mass Destruction

Warren Buffett wouldn't buy a gift card for anyone:

"But buried in the K that Home Depot filed late yesterday was the fact that for the full year, the number for gift card breakage was actually $52 million. Though the company warns repeatedly throughout the K that the $52 million is essentially a one-time bonus because it is accounting for unspent gift cards since the program was launched back in the late 1990s, it does leave one wondering how much this will contribute to Home Depot going forward not to mention what the impact will be on dozens of other retailers. After all, those gift cards are ubiquitous and they’re very hard to pass up when you’re desperately looking for something — anything — to buy for your brother-in-law."

Gift cards are nothing more than derivatives or the option to buy something at a certain price. If you give someone a gift card for $100 at Best Buy, for example, and they use it 11 months later, Best Buy has just made money off of the money you loaned them + the cost of the goods your buying has gone down + inflation went up + you always seem to have to add a little cash to your purchase.

And with gift cards getting redeemed just a little bit more than mail-in rebates, some creative accounting can be used to move the numbers around.

If you're going to give a gift card, why not just give something that's returnable?