Why the American Express gift card could be a waste of money

The first American Express prepaid gift card opens up a world of choice, but is potentially a rip-off.

American Express has launched its first prepaid gift card.

Shoppers now have the chance to bestow £20, £30, £50 or £100 to a loved one as a present for Christmas or to help celebrate birthdays and other special occasions.

Recipients can spend the value of their gift card anywhere (including online) as long as the retailer accepts American Express and it is within six years of being issued.

This makes it a lot more attractive than other gift vouchers which typically expire after a year or two and are limited to one shop or department store.

The lucky recipient can spend the value of their gift card at restaurants, on shopping, travel and entertainment. Plus they get access to discounts via American Express Selects.

It’s certainly a gift card with a difference and one that keeps giving.

But oddly it also keeps taking.

Raft of charges

The American Express gift card comes with a raft of charges that might make it more costly than you first thought.

First off there is the fee to purchase the American express prepaid gift card, which increases the more you want to bestow onto loved ones:

Then if you purchase your gift card online, a delivery fee will apply depending on the value of it:

However, you could avoid this charge by purchasing a gift card at Sainsbury’s, Superdrug or WHSmith.

But if you thought that was the end of it, think again. Starting 12 months after purchase, American Express will begin to deduct £1.50 a month from any remaining gift card balance.

You can see what that means for your loved ones that haven't yet started spending over a period of 18 months in the table below:

In just 18 months your gift loses £9 of its value.

So the £20 gift card you chose to allow your recipient more choice will cost you £23.95 in total, but they will only be able to spend £11.00 after 18 months.That’s a bit of a damp squib if you ask me.

In the five-year charging period American Express has the potential to take £90 using monthly charges, which means some of the cards shouldn’t even be advertised as being valid for six years.

An unspent £20 has a 25-month lifespan based on these charges £30 has 32 months and £50 just over 45 months before the value disappears entirely. The only pre-paid gift card that can stand the test of time from the range is the one for £100 which will have £10 left by the end of the six-year limit.

What American Express says

American Express told us: “The £1.50 monthly service fee is designed to help cover the costs associated with ongoing maintenance of gift cards on our systems and to keep the cardholder updated on their balance.

“The American Express gift card has a long shelf life, unlike some other gift cards, and in our experience we find that if customers are going to use their gift card they tend to use it within the first year so should not be affected by this charge.”

But why market a card that lasts for six years when it doesn’t for three out of four products? And just because they are likely to be used in the first year doesn't mean they will be. Someone might be saving it for a big future purchase like furniture for a new home.

Personally I find these charges bizarre, but then again gift cards are generally bad news (read: Comet: why gift vouchers make terrible presents for more). American Express had the chance to alleviate some of the concerns many have been pin-pointing for some time now, but has instead added a new dimension for gift givers to worry about.

More on gifts:

The best Secret Santa gifts

Twelve good, cheap Christmas gift ideas

Comet: why gift vouchers make terrible presents

The best Christmas present cashback deals this week

Frugal Christmas gifts for her

Frugal Christmas gifts for him

Frugal Christmas gifts for kids