Gift card kiosk
Gift cards have long been a popular option for holiday shoppers who are short on time and bereft of ideas. But in the past, givers had to make a difficult choice. Gift cards from credit card issuers or banks could be used almost everywhere but were often loaded with expiration dates and inactivity fees. Retail cards were usually free of such restrictions but required givers to select an appropriate retailer — a challenge if you had trend-conscious teenagers on your list.
This holiday season, the choice will be a little easier. The Credit Card Accountability, Responsibility and Disclosure Act enacted last year imposed new restrictions on gift cards that are designed to make them more consumer-friendly. While surveys show that consumers love to give and receive gift cards, billions of dollars are lost every year because of expiration dates, inactivity fees or misplaced cards.
Under the CARD Act, gift cards sold after Aug. 22, 2010, can’t expire in less than five years. The law also bars issuers from charging an inactivity fee unless the card has been dormant for at least 12 months. In the past, some gift card issuers deducted inactivity fees after just 30 days. Issuers are also barred from charging a fee to replace a lost or stolen card.
These restrictions could eliminate a lot of unpleasant surprises that have soured consumers on gift cards. But if you’re planning to give gift cards this year, there are still some drawbacks you should be aware of, including:
•Purchase fees. If you decide to give someone a gift card from a credit card issuer or bank, you’ll probably have to pay more than the face value of the gift card. All eight of the general purpose cards included in Bankrate.com’s annual gift card survey charge purchase fees, ranging from $3.95 to $6.95.
Those fees pay for a variety of services, including the infrastructure that allows gift card holders to check their balances online, says Crystal Wright, spokeswoman for the Network Branded Prepaid Card Association.
By contrast, none of the 46 retailers and restaurants in the Bankrate survey charge a purchase fee for their gift cards. Some retailers go even further, offering customers a gift or discount with a gift card purchase.
•Penalties. While the CARD Act restricts inactivity fees, it doesn’t eliminate them. Consumers who let their gift cards languish for a year or longer could still get hit with fees, which are typically subtracted from the value of the card. Most of the general purpose cards in the Bankrate survey charge a $2.50-a-month inactivity fee if the card isn’t used after 12 consecutive months. Only one of the retail cards in the survey, Pilot Travel Centers, charges an inactivity fee.
•Confusing disclosures. The CARD Act mandates that all gift card issuers must provide specific information on the back of their cards, including fees, expiration dates and a toll-free number. In July, though, Congress agreed to extend the disclosure deadline until Jan. 31, 2011, for gift cards produced before April 1.
Without the reprieve, the gift card industry would have been forced to destroy more than 100 million gift cards, Wright says. It takes about six months to produce gift cards, she says, so without the extension, it would have been difficult for card manufacturers to fill retailers’ orders in time for the holidays, she says.
As a result, gift cards you buy — or receive — during the holiday season may contain outdated information, says Craig Shearman, spokesman for the National Retail Federation. Card issuers are required to use several methods to inform consumers of their rights under the law, including signs in stores, information on websites and advertisements.
•Bankruptcy risks. Don’t buy gift cards from retailers that are having financial problems. In 2008, consumers who held gift cards for several retailers, including Bombay Co. and Sharper Image, learned that when a retailer goes bankrupt, a gift card may be worth no more than the plastic it’s printed on. The CARD Act doesn’t include any provisions protecting gift card holders if that happens again, says Greg Daugherty, executive editor of Consumer Reports. Retailers aren’t required to put money in reserve to back up gift cards in the event they go out of business, he says.
•Exclusions. The CARD Act restrictions on expiration dates and fees don’t apply to rebate, loyalty or promotional cards. Paper gift cards and gift certificates are also excluded.
So if you receive a gift certificate from your local nail salon during the holidays, make an appointment for January. Otherwise, your gift certificate could expire before you get your pedicure.
Via USA Today
