Gift Cards at the Center of Holiday Spending: What to Expect in 2025

Among the wide array of seasonal purchases, one type of gift continues to rise above the rest: gift cards.

Gift cards are emerging not just as the most popular holiday gift, but also as a practical financial tool. They bridge the gap between generosity and affordability, making them the quintessential choice for both givers and receivers this year. Drawing on PwC’s Holiday Outlook 2025 and McKinsey’s ConsumerWise survey, let’s unpack why gift cards are dominating, how consumers are adjusting their holiday spending, and what this means for retailers.

Gift Cards Lead the Holiday Gift Market

When Americans think about holiday gifts, gift cards remain at the top of the list. PwC’s research shows that 52% of respondents plan to give gift cards to friends and 47% to family members. This preference highlights the unique balance that gift cards strike: they preserve the ritual of giving while allowing recipients to choose what they value most.

Gift cards are also resilient to inflationary pressures. A $100 card still feels generous, even if its purchasing power is slightly diminished compared to last year. For consumers worried about tighter budgets, gift cards offer a straightforward, budget-friendly solution.

The chart illustrates how gift cards consistently outrank other popular gift categories like apparel, toys, and consumables. While apparel and toys remain strong contenders, the flexible appeal of gift cards ensures their place at the top. Additionally, consumables such as gourmet foods or beverages are seeing growing demand, but still lag behind.

Why Gift Cards Resonate in 2025

Several key factors explain the surge in gift card popularity this season:

1. Flexibility for Consumers
   Gift cards give recipients the freedom to select exactly what they want, reducing the risk of wasted spending on unwanted gifts. This flexibility resonates strongly in a year when budgets are tighter.
   

2. Convenience in Shopping
   With more than two-thirds of consumers starting their holiday shopping before Black Friday, gift cards provide a quick and easy solution. They eliminate shipping costs, stock shortages, and delivery delays—all major pain points in the current retail climate.
   

3. Post-Holiday Spending Boost
   Retailers benefit from gift cards because recipients often spend more than the card’s value when redeeming them. This creates an additional wave of consumer activity in January, extending the holiday shopping season.
   

4. Generational and Household Dynamics
   Millennials and baby boomers allocate more of their budgets toward gifts for others, while Gen Z prioritizes self-gifting. Across all groups, however, gift cards remain a unifying choice. Households with children are also spending significantly more overall, making gift cards a practical option for large families.
   

Shifting Holiday Budgets

Despite inflation concerns and tariff uncertainty, consumers plan to spend generously during the 2025 holidays—though more carefully than in recent years. Average spending per person is expected to dip by 5% from 2024, marking the first decline since the pandemic. Still, holiday budgets remain substantial, with consumers averaging $1,552 in seasonal outlays.

The largest cuts are happening in gift budgets, which have dropped by 11% year over year. Travel and entertainment, by contrast, remain stable, suggesting that people are willing to reduce spending on “things” but not on shared experiences.

This chart highlights generational divides:

• Gen Z plans to cut holiday budgets by 23%, reflecting economic pressures from early careers, inflation, and limited savings.
  

• Millennials are holding spending steady, balancing peak earning years with higher fixed expenses.
  

• Gen X is scaling back after years of steady increases.
  

• Baby Boomers, by contrast, expect to increase their spending by 5%, showcasing their relative financial resilience.
  

Together, these trends reveal a shifting consumer landscape where life stage matters as much as macroeconomics.

Payment Preferences: Budgeting Meets Practicality

Payment choices also reflect consumers’ desire for control and flexibility. While debit and credit cards remain the top options, the growing role of prepaid and gift cards as payment methods underscores their dual function as both a gift and a budgeting tool.

Gift cards and prepaid cards are now a top-three choice for 27% of consumers—up sharply from last year. Alongside PayPal’s steady rise, this trend reflects the broader push toward payment methods that simplify budgeting and reduce risk of overspending. Consumers are also leaning into cash as a way to avoid fees and stick to spending limits.

The Early Shopping Trend

One of the biggest behavioral shifts in 2025 is the rise of early shopping. McKinsey’s ConsumerWise survey found that two-thirds of consumers plan to start holiday shopping before Black Friday. This dramatic change reduces the traditional sales spike once associated with Thanksgiving weekend.

For retailers, the implication is clear: holiday success is no longer won or lost over one or two marquee days. Instead, promotions and discounts need to be sustained over several months. This is also where gift cards shine. They can be marketed and sold well in advance of the holidays, giving both early and last-minute shoppers a reliable option.

Inflation, Value, and the Hunt for Deals

Inflation remains the single largest driver of consumer sentiment in 2025. While tariffs remain a concern, the rising cost of everyday goods looms larger. Shoppers are increasingly value-conscious, looking for promotions, coupons, and practical gifts that deliver long-term utility.

Gift cards align perfectly with this environment:

• They provide certainty about value.
  

• They allow recipients to choose essentials if needed.
  

• They eliminate risks tied to fluctuating prices in categories like apparel or electronics.

As one baby boomer interviewed in McKinsey’s survey put it: “I’ll be spending mostly on gift cards because I really can’t afford shipping costs for anything else.” That sentiment reflects the broader consumer reality of 2025: the need for gifts that are both thoughtful and financially manageable.

The Role of Retailers and Brands

For retailers, the popularity of gift cards offers both opportunities and challenges. On one hand, they drive traffic into stores and websites, often leading to higher-than-card-value spending. On the other, gift cards can compress margins if not paired with strategic promotions.

Winning strategies include:

• Bundling Gift Cards with Consumables: Pre-packaged sets that combine cards with gourmet food or small goods can add emotional value.
  

• Cross-Promotions: Encouraging customers to redeem cards alongside seasonal discounts can increase basket size.
  

• Digital Integration: Offering e-gift cards with personalized messages aligns with younger consumers’ preferences and ensures convenience.

Moreover, with more than 39% of holiday gift spending happening between Thanksgiving and Cyber Monday, timing promotions around gift cards could be a powerful way to capture demand early in the season.

Generational Shifts and Emotional Drivers

While gift cards dominate across all groups, generational preferences still shape how they are used:

• Gen Z focuses on self-gifting and sustainability. Some are using gift cards to buy resale or upcycled items, reflecting eco-conscious values.
  

• Millennials blend practicality with generosity, often giving gift cards to manage costs while still signaling care.
  

• Boomers prioritize family gifts, often turning to gift cards to ensure their spending feels useful and appreciated.

Emotional factors also matter. Consumers want to preserve rituals and traditions even when cutting budgets. Gift cards help maintain the act of giving while providing flexibility, making them a bridge between emotional intent and financial reality.

Looking Ahead: Gift Cards as Seasonal Anchors

Holiday 2025 is shaping up to be cautious but resilient. Consumers are spending more deliberately, balancing inflationary pressures with a desire to maintain traditions. Gift cards sit at the center of this balancing act, offering affordability, flexibility, and emotional resonance.

For retailers and brands, the message is clear: gift cards are no longer just an accessory to holiday sales—they are a seasonal anchor. By leaning into this trend with creativity, personalization, and value-driven promotions, retailers can capture consumer loyalty that extends beyond December.

Sources & References

McKinsey. (2025). Holiday shopping 2025: US consumers hunt for early deals. https://www.mckinsey.com/industries/retail/our-insights/holiday-shopping-trends 

PwC. (2025). Holiday Outlook 2025. A seasonal remix: Value, meaning and generational shifts. https://www.pwc.com/us/en/industries/consumer-markets/library/holiday-outlook-trends.html