Gift Card vs. Cash – Which Would You Prefer?

dan ariely, family, happiness, humor, lessons learned, technology 2 Minutes

It’s a question that at first glance, at least to me, has a simple answer.

Cash, of course. Cash enables you to do anything you can do with the gift card, plus a whole lot more.

A gift card, on the other hand, restricts your choices to just the gift associated with the card. By gift card, I am referring to one for a specific store, not an AMEX or Amazon gift card, which are in many ways similar to cash, since they can be used for a variety of purchases.

Choosing cash over a gift card is the rational answer, but as Dan Ariely has made a career of pointing out, people do not behave irrationally.

Here is the answer he offered to this question:

Gift cards limit the way we can use money, which means that, from a strictly rational viewpoint, they are inferior to cash. But people prefer gift cards because of an irrational emotion called guilt—or, more accurately, because of our need to alleviate guilt.

When we look around us, we feel guilt over our desire for many different things: fancy chocolates, pens, expensive headsets, electronic gadgets, etc. We want these things, but the guilt caused by our wants is powerful, so it sometimes stops us.

When we get money, we’re likely to feel guilty about spending it on our more self-indulgent desires. But when we get a gift card, the guilt is much reduced and sometimes eliminated.

Interestingly, the particular level of guilt alleviation depends on the type of gift card. For example, if the card is an American Express gift card, it is basically the same thing as money, and it doesn’t ease much guilt. But if the gift card is restricted to Tiffany’s or REI, that money suddenly becomes more valuable. A dollar without guilt is worth more than a regular dollar.

And if you got any gift cards this holiday season, of any type, I suggest using them as if they were meant to be spent only in your favorite store—and enjoy them guilt-free.

I think I’d have to agree with Dan. If someone gave me $2,000 cash, it’s likely I would not go out and buy the latest Apple iPad, even though I really want one. I’d feel guilty about using the money in that manner, feeling selfish about how I spent the money. However, if someone gave me a $2,000 Apple gift card (hint, hint), I’d be at the Apple store the next day buying an iPad. After all, there is nothing else I could do with it.

But I guess the gift card is only the better option if it can be used at a place that you enjoy. If someone had instead given me a $2,000 gift card to a gourmet cheese shop, I’d end up giving the card away. In that situation, I would have strongly preferred $2,000 cash; at least that way I could buy find a way to use that I would enjoy, and would not feel guilty about, like taking my family out to a nice Mexican or Thai restaurant.

So once again, behavioral economics, via Dan Ariely, provides an interesting insight into why people make seemingly irrational decisions and offers a practical solution for a real-world dilemma.

P.S. Just to clear up any possible confusion, I don’t regularly receive $2,000 gifts. Actually, never…

*image from Tylt

Published by Jim Borden

A 60-something guy trying to figure out the world, and his place in it. Happily married for 40-plus years, three wonderful sons. Accounting teacher, fitness enthusiast, blogger, reader.

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42 thoughts on “Gift Card vs. Cash – Which Would You Prefer?”

  3. I don’t like giving gift cards. I’d rather give something that looks like more than I paid for it. Sometimes though there is little choice (all my children are going to have birthdays while in lockdown and they’re 100 miles away or further). The last one got a restaurant voucher, since it implies a celebration, but isolation intervened and he can’t now use till lockdown’s lifted. Maybe the next one will get Just Eat vouchers.

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  5. I don’t care for either … if someone likes or appreciates me enough to purchase something during a birthday or holiday, I’d prefer they ask me and I’ll let them know where the money is better invested. Give to others – my cause of choice. I’m grouchy because I really don’t want for anything. 😊🙏

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  7. Hi Jim,

    Cash is dirty an spreads germs of all kinds for both the buyer and the cashier. These days the cashier often does not even have to touch the payment card (think grocery stores, fueling stations, and car washes).

    Credit or debit cards or some gift cards are necessary for buying fuel in Franconia, NH where I buy my gasoline and tractor’s diesel fuel. This fueling station has no attendant on site and does not have any way to accept cash payments.

    I don’t think you can rent a hotel room or a car without a credit card even if you pay with cash or a gift card.

    I only use credit cards that give me cash back. When I use my Discover Card to pay for all my Amazon purchases I get both the Discover cash back plus the Amazon Reward Points that build up amazingly fast to lower the price of future Amazon purchases.

    Up here in the boondocks there’s not much need to carry cash. But if I go to a big city like Boston or NYC it’s safer to carry some cash so muggers won’t hurt you as badly. It’s probably an urban legend, but I was told about an Indian tourist in NYC who had no cash and was mugged. The mugger purportedly gave him $10 and said the next muggers might hurt him if he continued to walk around without cash.

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    1. Hi Bob. I much prefer using credit card over cash, particularly the contactless type (big fan of using Apple Pay on my iPhone).

      Sounds like a good deal with your Discover card on Discover.

      I rarely carry cash, but your story (which sounds like an Urban legend) makes me think I should carry a few dollars…

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  9. There’s guilt on the part of the giver too. Giving a gift card says (to a degree) that you have thought about what the recipient would like, and are assuaging whatever guilt you may feel about seeming not to think or care about them as much as you might. Me? I’d have cash every time – what’s guilt anyway?

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    1. Before I read Ariely’s argument, I felt the same way, and apparently so do the vast majority of people. But I think he makes a good case about guilt – at least for us Catholics 🙂

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      2. I just don’t like it; the only thing I used to like it on is pizza, but now I do without it. I don’t even like the smell of many cheeses…

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  12. Hmm that’s an interesting way to look at it. I would have said cash too but then I also agree I may feel guilty about using the cash whereas if it’s a giftcard I don’t have a choice but to buy something with it. But like you said it would have to be a giftcard for a place I like.

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    1. would need a system of barter for people to get the things they need, like food, and eventually that system of barter would likely turn into one that uses some form of exchange, like money…

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      1. That’s the thing. I’m talking about an enthusiastic world. Like people would share things or give away stuff they do because they do it without expecting anything in return, they do it because they love what they do from the bottom of their hearts. I can say so much more but I think I better stop here haha 😅 my ideal world is impossible for many to understand.

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