A survey report released recently predicts that the overall spend on gift cards this holiday season will decrease by 5%, that people will be using their gift cards less on frivolous stuff and more on necessities (so far this is all pretty obvious), and that open-loop gift cards (or what they call prepaid bank cards) will be the most desired by recipients due to the fact that they can be used in more places.

By some estimates, open-loop gift cards made up as much as 35% of all gift card purchases in 2007. Could we be headed for 50% for 2008? It will be interesting to see if breakage (the amount of the spend on gift cards that never gets redeemed/spent by consumers) increases or decreases in 2008, and whether or not this can be attributed to the increase in open-loop gift cards being bought. I suspect that open-loop gift cards have a higher breakage rate than closed-loop ones, even though they can be used in more places, because it is so hard to use the last few bucks on them.