As a music fan, Bruce McClary was pleased when he received a satellite radio with a six-month subscription as a gift. But as a budgeting expert, McClary couldn't help notice how much it cost to enjoy the present.
It's a lesson last-minute shoppers should take to heart. Even if you're stumped for gift ideas, don't go on autopilot and make gift choices that require the recipients to spend money, unless you've fully considered their circumstances.
McClary, a spokesman for Clearpoint Credit Counseling Solutions, first had to pay to install the satellite radio equipment in his car. That cost about $60 a few years ago, when he received the gift. When his gift subscription ran out, he then faced a monthly charge of about $12. Satellite radio subscriptions now range from $7 to $20 a month.
Eventually, McClary decided it was too expensive, and canceled the service despite enjoying it.
"The gift giver and the gift recipient are both losers here," McClary said. The giver spent money on something that ultimately will not be used. The recipient faced the choice of spending money that wasn't in his budget, or giving up his gift. "We were just all throwing money down the well," he added.
There are a host of items that could put someone in a similar position, from e-readers right down to gift cards, said Tod Marks, senior editor of Consumer Reports magazine.
Electronic gadgets tend to rise to the top of this list.
E-readers, for example, require the user to purchase most of the books they're likely to read. Cell phones and smart phones can require hefty monthly service plans — over $100 a month in some cases. Even MP3 players can encourage spending. Someone could load their existing music library on a new player, but may also be tempted into a music buying habit.
"I think people have a tendency not to think of the associated cost with a lot of these gifts," Marks said. "These are gifts that keep on giving — giving to the companies that sell them."
Then there are gift cards and gift certificates, often the fall back for last-minute shoppers.
Warnings about the multitude of fees that a gift card user can rack up are common this season, ahead of federal regulations limiting such fees kicking in early 2010.
Beyond the potential for high fees, however, a well-intentioned gift giver might not realize that such cards can encourage more spending by the recipient. A full 65 percent of people responding to a Consumer Reports poll said they spent more than the face value of a gift card when they used it.
In some cases, that could be because the recipient wasn't shopping carefully. But Marks said it's important to make sure the value of any card or gift certificate matches the prices at the store or restaurant where it will be used.
"If you're giving somebody a restaurant gift card for $20 and it's a three-star restaurant, that wouldn't even cover the tip," he noted.