Gift cards make great gifts, but it’s important to make sure gift givers understand the disclosures that come with the card. Otherwise, they could end up giving retailers the unintended gift of free cash.
Gift cards are a type of stored-value card. They look like a credit card; they have a magnetic strip that stores information about how much the card is worth. Some cards can only be used at one retailer or only at stores in a particular mall or shopping center. Others can be used anywhere major credit cards are accepted.
The Credit Card Accountability Responsibility and Disclosure Act of 2009 makes giving gift cards a better option than was the case before the law. The act established rules to protect consumers from excessive fees charged by some retailers and banks.
Money on gift cards is available for at least five years from the date the card is purchased. Value added to a gift card must be good for five years from the date the money was added. If the card expiration date is reached, but there is unspent money on the card from the past five years, a replacement card can be requested at no charge.
The law requires clear disclosure of any fees at the time of purchase. Be sure to read the terms and conditions before making your purchase and send them along with the gift card to the recipient. Include the receipt in case the card is lost or stolen.
The law restricts maintenance and usage fees. A fee cannot be charged for using the gift card, not using the gift card, card maintenance or adding value to the card unless the card has not been used for more than 12 months.
Tips to Keep in Mind
Understand how gift cards work. Choose cards from specific retailers over cards offered by financial institutions. Cards that can be redeemed wherever credit cards are accepted tend to come with more and higher fees.
Watch for hidden fees. There may be a charge to check the balance of the gift card, even in the first 12 months, so be sure to keep track of how much is spent. Watch for delayed fees that kick in if the card has not been used for 12 consecutive months.
If a gift card is lost or stolen, it may not be replaceable. Some retailers charge a replacement fee, provided there is proof of purchase, such as a sales receipt, and the ID number of the card.
Registering received gift cards with the issuer provides extra protections. Information about how to register the card should be included with other card details. If not, check the website of the issuer for information about how to register the gift card. Some issuers will not replace lost or stolen gift cards unless they are registered.
Use the card promptly. About 10 percent of gift cards are never redeemed. Unused gift cards are a gift to retailers of more than $9 billion a year.