Will Cash Replace Gift Cards In Tough Times?

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Tough economic times may give cash an edge over other forms of payment, including prepaid cards, new survey data suggest.
 Commissioned by Western Union Co., the September survey of 1,000 adults found that 56% of respondents would prefer receiving $100 in cash instead of a $100 gift card, while 57% plan to give cash this holiday season.
 "While the popularity of gift cards has increased exponentially in recent years, with consumers preferring to choose exactly what they wanted from a retail store, our survey now reveals a new trend: people want more flexibility," Stewart A. Stockdale, Western Union executive vice president and president of the company's U.S. and Canada regions, said in a statement.
 Archstone Consulting LLC, a market-research firm based in Stamford, Conn., predicted in September that retail gift card sales would fall 5%, to $25 billion from $26.3 billion in the 2007 holiday shopping season. The company made this prediction based on a survey of 1,000 consumers that found most respondents want open-loop prepaid cards, the company says.
 Western Union announced earlier this month thatits survey results prompted the company to launch a new campaign, "Cash, the perfect gift," to encourage consumers to give cash to one another and to send funds over Western Union's networks. Based in Englewood, Colo., the company did not disclose the cost of the campaign but said it would include radio and television advertisements and Web sites where consumers can post stories about gift giving and send free e-cards to family and friends.
 The company commissioned New York-based GfK Roper Public Affairs & Media to conduct the survey to learn more about consumers' gift-giving plans so it could plan its to advertisements better around such holidays as Diwali in India; Eid al-Fittr, which Muslims celebrate around the world; and the Chinese New Year, Dave Liggett, a Western Union spokesperson, tells Prepaid Trends.
 "We have people from all those different countries that send money from the United States," Liggett says.
 Though the international aspect was important to the campaign, the survey results suggest the state of the U.S. economy has affected consumers' plans, Liggett says.
 Western Union is not alone in encouraging the use of cash. In September, the National Foundation for Credit Counseling released eight tips to help consumers find $1,000 for holiday spending before the Friday after Thanksgiving, considered the busiest shopping day of the year. Among the suggestions were eliminating bank fees by avoiding overdrafts and foreign-ATM fees, and to stop using credit cards and make purchases with cash instead.
 However, using a prepaid card for holiday shopping could be a good idea for consumers who do a lot of impulse spending, Gail Cunningham, a spokesperson for the foundation, tells Prepaid Trends. "I would think any action that you could take that limits your spending to what is reasonable to your situation is a good move," she says.
Signs of changing consumer views toward gift cards appeared earlier this year, when Wal-Mart reported in February that consumers were waiting longer to use gift cards and were spending gift card funds from 2007 on such necessities as groceries and laundry detergent (Prepaid Trends, 2/27).