Unwrap the Fine Print: Essential Gift Card Tips for the Season

11 November 2024

With the holiday season rapidly approaching, you may consider gift ideas for friends, family members and business associates. A popular and convenient option is gift cards for restaurants, retail stores and online vendors. However, these cards come with potential downsides that gift givers and recipients should be aware of.

Close-Up on Prepaid Cards and Cards from Retail Giants

Many gift givers opt for prepaid (or open-loop) gift cards from major bank card companies, including Visa and Mastercard, because recipients can use them anywhere that accepts the issuers' cards. Likewise, closed-loop gift cards from Big Box retail giants (such as Target or Walmart) and online marketplaces (such as Amazon) are popular because recipients can use them to purchase a broad range of products. But beware, these cards may come with fees and restrictions.

For example, according to Visa's website, the standard activation fee for Visa prepaid gift cards ranges from $2.95 for gifts costing between $10 and $75 to $6.95 for gifts of $350 to $500. Plus, you may have to pay a store-specific activation fee. Some Visa gift cards also pile on additional monthly maintenance and inactivity fees. If a physical card is lost or destroyed, you can obtain another one but might incur a delivery charge for the replacement. In addition, Visa cards may require temporary authorization at certain locations, such as gas stations, leading to delays and hassles when the card is redeemed.

In contrast, Amazon gift cards don't impose any inactivity or authorization fees and generally have no expiration date. However, the recipient must be able to shop online and may incur shipping fees unless he or she is an Amazon Prime member.

Drawbacks

Gift cards take the guesswork out of gift giving, allowing recipients to buy whatever they want. However, they might cost more than their face value — or go partially or completely unused. According to a 2024 Bankrate study, 43% of Americans hold at least one unused gift card, voucher or store credit, amounting to a staggering $27 billion nationwide. Of these people, 34% have forfeited the value associated with the gift, misplaced the card or just plain forgot about it.

Also, beware: Some gift cards may expire if they aren't used in a timely fashion. What's more, gift card issuers may charge "inactivity fees" if the card isn't used within the first year. Other card companies charge "activation fees" for authorizing use.

Read the fine print if you decide to give gift cards this holiday season, whether for personal or business purposes. Consider letting recipients know about applicable fees and expiration dates and encouraging them to use gift cards in a timely fashion.

Legislative Relief

There's some good news related to gift cards: Most no longer expire, due to federal and/or state law protections. The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 states, "A gift certificate, store gift card, or general-use prepaid card may contain an expiration date if ... the expiration date is not earlier than 5 years after the date on which the gift certificate was issued, or the date on which card funds were last loaded to a store gift card or general-use prepaid card." It also provides that this expiration must be "clearly and conspicuously stated."

While federal law gives you five years from the date of issuance to use a card, several states have enacted their own gift card legislation that offers more protection than the CARD Act. For example, New York recently extended the expiration date to nine years and Massachusetts extended it to seven years. And at least 10 states — including California and Florida — don't allow gift cards ever to expire.

Regardless of prevailing state law, you don't have to automatically accept what's in a card's fine print. For example, a vendor may still honor an expired card or reload the unused balance from an expired card to a new card if asked politely. That's a good place to start if you find an old card that's expired.

If a card issuer goes out of business, you may file a bankruptcy claim or explore other legal remedies, such as petitioning the state attorney general's office. Research your state's laws for more details.

Gift Card Fees

Things get a little trickier when it comes to fees. The card company may charge monthly inactivity fees — sometimes called "dormancy fees" or "service fees" — if you keep the card for over one year before redeeming it. The CARD Act requires the company to notify "the purchaser of such charge or fee before such certificate or card is purchased, regardless of whether the certificate or card is purchased in person, over the internet, or by telephone."

Similarly, some gift cards — such as those issued by Visa and Mastercard — have an activation fee when purchased. This one-time charge may range from roughly $1 to $10. (See, "Close-Up on Prepaid Cards and Cards from Retail Giants," above.)

Carefully examine the front and back of a gift card to find information about fees. The phrase "There are no expiration dates or fees" likely puts you in the clear, but you may find a disclaimer about inactivity fees in small print. Also, you can contact the card issuer by phone or through its website to determine the unused balance on partially used cards. The phone number or website is usually printed on the back of the card.

Returns and Unused Balances

Due to fraud prevention policies, most companies that issue gift cards don't allow them to be returned, especially if the card is older or has expired and you don't have a receipt. Once a gift card has been purchased, it's usually considered a final sale. Depending on state law, you may be able to exchange a gift card with a relatively low balance (typically $10 or less) for cash.

However, some retailers may offer refunds on gift cards in special circumstances. For instance, a refund may be provided if a card was purchased in error or it doesn't work. Card issuers' policies vary, so it's best to check with the specific store or vendor.

If you can't return a gift card to the original store, you may be able to sell or exchange it on a third-party platform for a portion of its value. Examples of these platforms include CardCash, Raise or Cardpool.

'Tis the Season

Gift cards can be a convenient way to please the hard-to-buy-for people on your shopping list this holiday season. However, it's important to understand the potential drawbacks of gift cards. Whether you're giving or receiving gift cards, it pays to read the fine print related to fees and expiration dates and research applicable state laws to understand your legal protections.

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