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Total gift card sales for the 2008 holiday season will be down 9%, to $88.4 billion from roughly $97 billion in 2007, according to a report released today by TowerGroup Inc., the research division of MasterCard WorldWide. TowerGroup predicts sales of merchants' proprietary closed-loop gift cards will drop 14%, to $59.9 billion from $70 billion. Sales of open-loop cards supported by national card brands will grow 6%, to $28.5 billion from $27 billion, TowerGroup says. The report also suggests consumers will purchase fewer closed-loop cards for fear losing any funds left on them if the retailer goes bankrupt. Conversely, consumers will buy more open-loop cards because they provide more choices on where to spend the funds, so they can take advantage of post-holiday sales or buy such necessities as groceries or gas, TowerGroup says. In addition, consumers this year will use more of the funds on their cards, in part, because 36 states have put laws in place banning or restricting fees and expiration dates, and requiring better disclosure and escheatment for closed-loop cards, so cardholders have more time to use the funds on cards. Unused card value will fall 20%, to $6.4 billion by the end of 2008 from $8 billion in 2007, TowerGroup says. Needham, Mass.-based TowerGroup could not immediately be reached for comment.
