CASH: The most thoughtful gift this season?

With financial strain facing many American families, consumers look for ways to maximize their gift-giving utility. Though consumers flocked to department stores in droves, coupons in hand, on Black Friday, traditional gifts are not the best use of limited Christmas funds.

Gift cards have long been viewed as a “middle ground” in the gift-giving realm. Though more thought is exerted in choosing the origin of a gift card, there is less worry that it will go underappreciated.

According to research by TowerGroup, Americans spent $92 billion on gift cards last Christmas season, and Nielsen projects that even more money will be spent this year. Consumer Reports estimates that approximately 62 percent of Americans purchase gift cards during the holidays.

Though a preferred present among consumers, gift cards prove to be inefficient in terms of generating Christmas cheer, both for the giver and the receiver.

The sobering truth is that nearly 30 percent of consumers never redeem their gift cards. Last year alone, $6 billion of card contents were siphoned from fees and expiration. The extent of unwanted gift cards is so vast that auction websites specialize in gift card swaps.

Pressure from Congress has curbed gift card waste by amending Regulation E of the Electronic Funds Transfers Act to extend expiration dates of credit and bank-issued gift cards to five years and eliminate fees on cards that remain inactive for 12 months. The act does not protect gift cards issued by individual stores and restaurants, which typically carry one-year expiration dates.

Despite the waste in gift card spending, giving physical gifts produces even less overall utility. Close friends and relatives may be able to purchase a favorable gift, but typically gifts are not well-matched to their recipients, creating deadweight loss of utility. Post-Christmas surveys reveal that utility of gifts are valued only at 80% of their actual cost to the giver.

Monetary gifts are the only sure way for both the giver and receiver to maximize the utility of a present. Though it may seem tacky, the gift with the most love and sentiment this Christmas season is a gift of cash.