Gift cards may look like fancy pocket-sized credit cards, but these cards have little or no value until "activated." Learn what to look out for when purchasing or using these conveniently smart and increasingly popular gift items.
Gift cards, as the name implies, are pre-paid monetary gift options that allows the purchaser or gift recipient to buy goods and services at retail and other establishments. There are generally two kinds of gift cards retail or "closed loop" gift cards and bank or "network" gift cards. Retail gift cards are issued by a specific store or brand, and can only be redeemed at the named store, like Wal-Mart, Best Buy, or Applebees. Bank cards, like those issued by Visa or American Express, can be used anywhere the brand is accepted. Gift cards may be purchased online or in-person, with an initial value set by the purchaser.
Gift Card Laws
At one point, gift cards were frowned upon by consumers because of the confusion around hidden costs/fees, expiration dates, strict use policies, and other restrictions associated with the cards. Gift card policies remained largely in the hands of the retailer or bank issuer -- who often operated without any clear rules or guidelines.
As recently as 2010, new rules were established under the Credit Card Accountability Responsibility and Disclosure Act affecting gift card dormancy, inactivity, services fees, and expiration dates. Essentially, gift card issuers cannot charge inactivity fees including maintenance fees, balance inquiry fees, and transaction-based fees -- until one year of inactivity has passed. Also, gift cards must remain valid for five years after the date it was issued.
Many states, like California and Massachusetts, have banned gift card "maintenance fees" altogether, and many stores offer "no fee, no expiration" policies to boost sales and curtail consumer confusion even in states where the law doesn't require it.
The Fine Print: What to Look For
Even though new laws have made gift card policies more transparent, it is still important for consumers to read the "fine print". While laws regulate the time period in which retailers and merchants may charge fees, it is important to know what may happen after the time period has passed.
Below are a few examples of what to look for when buying or using a gift card.
Tips for Gift Card Recipients
If you feel you've been subject to unfair and misleading business activity involving gift cards, or have any other consumer-related problem, speak with a knowledgeable consumer protection lawyer in your area.