Gift cards have become incredibly popular. You can find them everywhere, including racks of them at the grocery store! Pick up a gallon of milk, some eggs, and throw in a $25 gift card to a national book store chain for cousin Fred's birthday this weekend.

As the holidays approach, gift cards are the number 1 gift on people's wish list! Last year, 52.1% of Americans told surveyors at American Pulse that they'd rather receive gift cards or cash from Santa.

As convenient as they are, gift cards come with plenty of pitfalls for both the buyer and the recipient.

First of all, they can be a flat out waste of money.  $8 billion worth of gift card money was thrown away last year due to unused, lost or expired gift cards. What a pay day for retailers and what a loss for consumers!

Second, in this shaky economy, you have to worry about getting stuck with a gift card from a retailer who goes out of business.

Finally, gift cards can be fraught with fees and fine print.  That is changing somewhat with the new credit legislation.  Here is a full list of the new rules for gift cards. 

Bottom line is that it's more important than ever that you be smart about gift cards. If you're buying one to give, you want to buy the best available. And if you receive a gift card, be sure to USE it! (We'll have more tips on how to get the most out of your card in just a moment.)

How to Find the Best Gift Card

First of all, determine what kind of gift card would be best for the person. Sounds easy, right? Well, not exactly! Gift cards are now offered by banks, malls, retailers, airlines, hotels, Web sites, restaurants, state parks, and some, I'm sure, I haven't even thought of!

Need some help in winnowing down the field? First off, DON'T give a bank gift card tied to a particular credit card, such as Visa or Mastercard. These cards mostly come with fees, expiration dates and other potential pitfalls.

Retail cards have a greater chance of survival, but again, they may come with dwindling value as time goes on, as well as expiration dates in many states. So to avoid the possibility that your recipient won't use it, try to choose a gift card from a retailer the person frequents often or would like to frequent.

Next: How to Get the Most Out of Your Gift

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