When you’re stumped for a gift idea, a gift card may sound like a good alternative to cash or an unwanted present. But many cards still come with fees and other restrictions that can erode their value, the Better Business Bureau (BBB) warns.
Gift cards are an $87 billion industry, according to TowerGroup, a market research firm. Retailers like the cards because they get cash up front and they draw traffic to stores or websites. However, unspent cards can be a loss to consumers.
The Credit Card Accountability, Responsibility and Disclosure (CARD) Act, which took effect recently, provides some protection to consumers who buy or receive gift cards. The law applies to gift certificates, store gift cards and general-use prepaid cards, which are usable at many merchants and may be branded by payment networks, such as Visa or MasterCard.
For example, consumers will now have at least 12 months to use gift cards before they lose value. The CARD act requires that card balances remain valid for five years after issuance or after they were last loaded with money, whichever occurred later. After a year, only one fee can apply per month, and the amount and terms for fees must be disclosed to the user in advance.
Some fees, such as issuance or sales fees, aren’t covered by the CARD Act. The fees may chip away at the balance each time a user makes a transaction, checks the balance, requests a replacement card or calls customer service, for example.
Gift cards may look like a good deal, but it pays to check the fine print before you buy one. You may be better off simply giving cash or a check rather than a piece of plastic.
Consumers need to keep the following tips in mind when making a gift card purchase:
- There is no maximum when it comes to monthly fees that can apply after a year of inactivity. A company could charge a very high amount as long as the fee is disclosed when you buy the card.
- The plastic card may expire before the five-year redemption period required under the CARD act. Some cards operate like debit or credit cards and have an expiration date. To redeem the balance, you may need to ask for a new card. Expiration dates should be disclosed when you buy the card.
- Check the terms and conditions of the gift card. If you are giving a card to a friend who wants to shop online, make sure the card can be used for that and not just in a store. Fees and limitations should be printed on the packaging of a gift card.
Research any company carefully before doing business with it. Check out BBB Reliability Reports online at www.bbb.org
or by calling 208-342-4649