Gift Cards Seen As Way To Help Friends Cope

Gift cards aren't just last-resort purchases by baffled holiday shoppers anymore. They're becoming the presents of choice for Americans who want to help friends and relatives cope.

Spending on holiday gift cards may climb 25% to $35 billion this year, according to Archstone Consulting LLC, boosted by cards that aid consumers contending with higher food and fuel costs and the deepest housing slump since 1991. That tops some estimates for holiday sales on Web sites.

Gift cards that pay for gasoline at Exxon Mobil Corp. stations, groceries at Wal-Mart Stores Inc., or medical bills through health-insurer Highmark Inc. will help increase the category to 5.9% of total American holiday spending this year, Archstone. That's up from 4.9% in 2006.

"The practical usage of gift cards is the biggest story this year, due to economic fears of many consumers and tighter budgets," the director of research at Experian Group Ltd.'s Hitwise in New York, which measures Web traffic, Heather Dougherty, said.

Gift cards — credit card-sized pieces of plastic with the prepaid amount readable by a scanner — represent one of the few bright spots for retailers this holiday season. The National Retail Federation in Washington says total retail sales may increase 4% in November and December, the smallest gain in five years.

"We've seen a cultural shift in how we view gift cards, from a thoughtless, lazy person's gift to a thoughtful gift," a spokesman for the National Retail Federation, Scott Krugman, said. "It's becoming a practical gift for practical purposes."

Gift-card sales also have been spurred by their increased availability in supermarkets and drugstores. Cards for Applebee's restaurants, Omaha Steaks, Visa Inc., and AMC movie theaters were among the selection at a Duane Reade Inc. drugstore in New York last week.

Prepaid debit cards such as those from Visa and MasterCard Inc. may be the most popular type of gift card this year, Archstone estimates, accounting for 16% of the total market. Cards for discounters such as Wal-Mart and food and beverage providers such as Starbucks Corp. probably will be the next two most popular categories, Archstone says.

Gift cards from credit card companies are gaining popularity because they can be used for many purposes, including living expenses, Ms. Dougherty said.

Gasoline station operators including BP Plc, Chevron Corp., and Exxon Mobil offer cards. Shoppers can buy gift certificates for customers of Portland General Electric Co. in Portland, Oregon, and Equitable Resources Inc. in Pittsburgh to pay utility bills.

Highmark, a Pittsburgh-based health insurer, on November 1 introduced the Healthcare Visa Gift Card. The card allows people to pay for items such as prescriptions, Lasik eye surgery, facials, gym memberships, and fertility clinics. Purchasers can buy cards worth between $25 and $5,000. "It gives the liquidity of cash, but it's more targeted to that recipient's needs," a Highmark vice president, Kim Bellard, said. Interest in the card was "higher than expected," he said, declining to disclose details.