Why Gift Cards Trigger My Inner Economist
Long before I became a financial planner, my first academic love was economics. It was my high school and first college major, and it still shapes how I think every day. Financial planning, after all, is really personal economics: the study of how individuals make choices, allocate resources, and navigate life’s many trade-offs.
And if you remember Econ 101, you might recall the quintessential example: “Butter vs. guns.” It wasn’t about dairy or weaponry… it was about choices. Every decision involves giving something up in order to gain something else. Trade-offs are constant, unavoidable, and deeply human.
Which brings me to a seasonal confession: Gift cards bother me. Not emotionally, but economically.
Why Gift Cards Make the Economist in Me Twitch
This time of year, gift cards are everywhere. They’re easy, efficient, and certainly better than buying a sweater in the wrong size. Yet from an economist’s perspective, gift cards represent a fascinating—if slightly frustrating—example of holiday inefficiency.
Economists see gift cards as introducing a classic trade-off:
- You spend real dollars.
- But the recipient receives something less flexible than real dollars.
That gap is what economists call “deadweight loss.” A $50 bill can be spent anywhere. A $50 card to Store X can only be spent at Store X—even if the recipient would have preferred something else.
That constraint isn't always a bad thing (more on that below), but from a purely economic perspective, it represents a loss of choice and value.
Then there’s a surprisingly large amount of gift card money that remains unused. Studies estimate that Americans have $20–27 billion in unused gift cards. Some are forgotten, some expire, and some end up with tiny balances that never get spent. Economists call this “breakage.” Retailers call it profit.
But Humans Don't Think Like Spreadsheets
Of course, pure economics isn’t the whole story. People aren’t robots optimizing utility curves. Sometimes the constraint is part of the gift:
- A spa gift card encourages much-needed self-care.
- A restaurant card nudges a couple to enjoy a night out.
- A bookstore card says, “I see who you are.”
These gifts succeed because they are more than just financial—they are expressions of intention.
This is where economics meets humanity. We don’t necessarily give gifts to maximize efficiency. We give them to express care, meaning, humor, affection, or shared identity. Economics helps us understand the mechanics; relationships fill in the rest.
A More Human Lesson in Trade-Offs
So what do we do with all this?
Maybe the lesson is simply that the holidays themselves are a beautiful set of trade-offs:
- Efficiency vs. thoughtfulness
- Convenience vs. connection
- Money spent vs. meaning created
Economics can shed light on these decisions, but it doesn’t make them for you. Personally, when I lean towards thoughtfulness, I prefer to give a meaningful gift. And when I lean towards flexibility and efficiency, I use the original gift certificate: crisp US bills.
Regardless of whether we choose gifts like a card, cash, or something handmade, we are really making decisions about how we connect with one another.
And in that sense, inefficiency is sometimes a feature, not a bug. Although it’s a feature that can bug me.
Wishing You a Season of Meaningful Choices
Whether you give a gift card or anything else, may it bring joy, warmth, and connection. The economist in me might grumble about deadweight loss, but the human in me knows the holidays are about something much more important: the intention behind the exchange.
Happy Holidays.
Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of any firm or organization. This content is provided for general informational and educational purposes only and should not be construed as personalized financial, tax, accounting, or investment advice. Although the author is a CPA and holds the PFS credential, no professional services are being offered through this article. Readers should consult their own qualified advisors before making decisions based on this information. The content may include information from sources believed to be reliable but is not guaranteed and may be subject to change without notice.
Copyright: © 2025 Jean-Luc Bourdon, Original text, structure, organization, and editorial revisions created by the human author. The author used AI as a drafting tool, but exercised creative control by rewriting, restructuring, and contributing original analysis, tone, and expression. Disclosure in accordance with U.S. Copyright Office guidance on AI-assisted works.