Gift cards make great gifts. They are convenient, easy to use and readily available online and in stores. However, to avoid giving a gift that keeps on taking, thoroughly read and understand the disclosures that come with the card.
A gift cards looks like a credit card with a magnetic strip that stores information about the card’s value. Some cards can only be used at one retailer. Some can only be used at stores in a particular mall or shopping center, and others can be used anywhere major credit cards are accepted.
Cards now good for five years
Thanks to the Credit Card Accountability Responsibility and Disclosure Act of 2009, gift cards are a better idea than in the past. The act established new rules to protect consumers from excessive fees once charged by some retailers and banks.
Money on gift cards must now be good for at least five years from the date the card is purchased. Value added to a gift card must also be good for five years from the date the money was added. If the five years run out and unspent money remains on the card, you can request a replacement card at no charge.
The new law requires clearer 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 to the recipient with the gift card. Include the receipt in case the card is lost or stolen.
No more penalties
Maintenance and usage fees are restricted. You cannot be charged for using the gift card, not using the gift card, card maintenance or adding money to the card unless the card has not been used for more than 12 months.
Whether giving or receiving gift cards, be sure you understand how they work. Consumer advocates recommend cards from specific retailers over cards offered by banks. Bank cards can be redeemed wherever credit cards are accepted, but tend to come with more and higher fees.
Watch for hidden fees. You may be charged to check your balance even in the first 12 months, so be sure to keep track of how much you spend. Watch for delayed fees that kick in if the card has not been used for 12 consecutive months.
Do not lose your gift card. If a gift card is lost or stolen you may not be able to replace it. Some retailers charge a replacement fee, provided you have proof of purchase such as a sales receipt and the ID number of the card. Registering your gift card with the issuer often provides extra protections.
If you receive a gift card, register it with the issuing bank or retailer. Information about how to register your card should be included with other card details. If not, check the website of the issuer for information about how to register your gift card. Some issuers will not replace lost or stolen gift cards unless they are registered.
Use the card promptly. About ten percent of gift cards are never redeemed. Unused gift cards return more than $9 billion back to retailers.
(Michael Rupured is a financial specialist with University of Georgia Cooperative Extension.)
Giving gift cards for the holidays has become less of a risk thanks to a new act that extends their life to five years. University of Georgia financial experts still encourage consumers to read the fine print before buying and giving gift cards.Download Image