Whaaa?? The Gift that Does NOT Keep on Giving

Hey, I’ve got a deal for you! You will lend me $50. In order to do this, you will have to pay me a service charge of $3-7. If I keep the money for longer than a year, I’ll owe you $2 less every month. If I don’t pay you back in 3 years, I’ll owe you nothing at all! Great deal, huh?

You’d think no one would be crazy enough to lend that money, but it’s actually incredibly popular to do exactly that: millions of American Express gift cards are sold every year. You give American Express money up front that they don’t have to repay to a merchant until later– essentially you are giving them a loan, but they will charge you for the privilege.

I noticed this story in today’s business section– fortunately, American Express is eliminating the most obnoxious of those fees, the monthly charge for not using your card for over a year. But they still charge a purchase fee of $2.95-6.95. (More info on gift card fees.)

I think I’ve only been given an American Express gift card once, but I thought $50 was $50– I had no idea how much of that could be eaten up in fees. If you want to give someone a gift, just buy them an actual present, or give cash.