By Sharon Omahen
University of Georgia
Gift cards are convenient and popular. Many people see them as the next best thing to cash. But before you buy or use a gift card, a University of Georgia financial expert has a warning: read the fine print.
"Different cards come with different terms and conditions related to fees, expiration dates, where you can use them and what happens if they're lost or stolen," said Michael Rupured, a UGA Cooperative Extension financial specialist. "Gift cards are definitely not all created equally. There can be some big differences from one card to another."
Some gift cards actually cost more money than what they're worth, he said. For example, a $50 gift card can cost $55.
"You've lost $5 from the purchase fee right off the bat with this type of gift card," he said. "Typically, these are the gift cards that can be used at many locations."
Gift cards bought directly from a retailer are usually offered at face value, he said. But they may have different charges associated with them.
The cardholder can be charged for not using their gift card, too. Some companies deduct a nonusage fee starting about six months after the card's purchase date.
"This is a concern, because many people set gift cards aside and forget about them," Rupured said. "And this fee will continue to be subtracted from the card until its value is depleted."
Per-use transaction fees are another possible drawback to using gift cards, he said. This fee is deducted from the gift card if the entire amount isn't used in one transaction.
Rupured said a fee that’s charged even when you call to check the card’s balance could reduce the face value of some gift cards.
"All of these fees and terms should be disclosed, perhaps on the card itself," he said. "More often, the fees are explained in a separate document, on a Web site or from a toll-free number."
Other than these downsides, gift cards do work just like cash. When you make a transaction, that amount is deducted from the card value.
And, just like cash, if you lose a gift card, the person who finds it can pick it up and use it.
For safety sake, Rupured said, write the gift card's unique number on your receipt. Then attach the receipt to the gift card.
"The person you give it to will know how much you've paid," he said. "Now they'll have the information they need to replace it if it's lost and the details on any possible fees, too."
As long as you pay attention to the terms, he said, gift cards can be useful.
"A lot of retailers don't charge any fees for using their gift cards," he said. "And if you have family or friends in different cities, you can buy a gift card from a major retailer. Just check with them to make sure they have the same retailer near by."
To make sure the $25 you spend on a gift card is actually a $25 gift:
1. Be sure you understand the terms.
2. Keep the receipt and write down the card number, in case it's lost or stolen.
3. Give the receipt with the gift card so the recipient will know how to use it to get its full value.
"If you're leery of gift cards, just give a personal check," Rupured said. "There aren't any fees associated with it, and the recipients can get the cash and use it anyway they like."
Despite your good intentions, your recipient's forgetfulness or disorganization may lead to your gift card's never being redeemed.
"I recently read that a fifth of all gift cards purchased last year were never redeemed," Rupured said. "Recipients said they either didn't have time to go shopping or couldn't find anything to buy."