Hidden Costs of Gift Cards and Cash

There are more beneficial ways to receive and give money

Problems with Gift Cards

Who on this planet has ever been given a $25.00 gift card and spent EXACTLY $25.00? What we end up doing is spending over the $25.00 to get the “full effect” of the $25.00 right? At least 99% of the times that’s the case. The remaining 1% might be the few conservative-types out there that spend $24.99 and let the remaining $0.01 never be spent, or just plain lucky and hit the mark exactly. Even for those that save the penny it might expire before it is used or at best, there was $0.01 that was sitting around doing nothing. Imagine being the recipient of a gift card for a restaurant, paying almost all of it through one night out, and disliking your experience and never going again. Money wasted. Not to mention that gift cards lock you into a purchase that might not be in your best interest.

The Problem with Cash - Added Costs and Less Availability

When you receive cash you either hold onto it or spend it. If you hold onto cash, you will gain opportunity cost (not a good thing) because that cash could be gaining you interest elsewhere. If you spend it, say to buy a coffee, you have also gained an opportunity cost because had you used a credit card instead, you could have been given cash back rewards. This is to say that a credit card could be used without a detrimental habit of not paying the credit card off! Also, some places will charge you more to pay with a card than cash, but the number of those places are decreasing significantly. Now let’s say we’re savvy, and we want to deposit the money instead so we can invest it the right way. We have instantly signed away our time away to depositing money at the bank. This means not only can’t you receive cash but you can’t spend it either! How could this be avoided? Well, there are many apps and features that are there to help.

The Balance

If you really wanted to gift someone money, there ARE ways you can do it more efficiently. You can use numerous free services like PayPal, Venmo, and Zelle. It won’t be as fast a transaction, so cash DOES have advantages in this regard. Although, the time value of something you dish out in cash is almost certainly a non-factor. At least with this regard you can send and receive when you desire, without added costs.

Help is on the Way But let’s use an example. You're babysitting and the family you are babysitting offers you either cash or Venmo to pay you. If you chose cash then they have to go to their bank and get cash or they have money laying around not making interest to use. They lose out on time and travel expense. You then also need to go to the bank and deposit your money once you receive it. This detracts from your time and costs you more on travel as well. If you hold onto the money you lose out on interest and if you spend it you lose out on credit card cash back. Choose to use Venmo instead and get the automatic transfer without any of the hassle. For those who are concerned with Venmo being a slower transaction also keep in mind that if the family forgets to pay you Venmo can be an instant fix. Cash means they will pay you the next time they see you, maybe even longer if there’s a pesky Sunday involved, or if they forget again.


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As an associate I earn from qualifying purchases. I also would never recommend something that I, myself, would not do and can genuinely say that there is great value in these recommendations.


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