For many consumers, gift cards offer a simple, convenient solution for holiday gift giving. But shoppers need to stay on their toes when purchasing and using gift cards, says J. Michael Collins, Extension family and consumer economics specialist and director of the UW-Madison Center for Financial Security.
There are two main types of cards, explains Collins. Some are issued by major credit card companies such as American Express, MasterCard and Visa. These are usually available at retail stores and online and may be used for any purchase where credit or debit cards are accepted.
Retail gift cards are sold by retailers and restaurants and can be used only with those merchants. Many mall operators also offer gift cards that can be used in all–or most of–the stores in the mall. “As with all cards, be sure to read the fine print. And then read it again,” says Collins.
Consumers may be charged a fee when they purchase a gift card. “Many issuers charge a fee,” says Collins. “These can range from $3.95 to $4.95 per card, depending on the bank that’s issuing it. If you’re buying gift cards for a large number of people, those fees can add up.”
Although Wisconsin does not regulate the sale of gift cards, federal law requires disclosure of all fees at the time of purchase. But Collins says to be sure to read the details; for example, issuers can start charging monthly inactivity fees after 12 months of non-use.
Under the 2009 Credit Card Act, most gift cards sold after August 22, 2010 cannot expire until at least five years from the purchasing date. Prior to this regulation, gift cards typically expired after one to two years.
“The new rules say the balance cannot expire in less than five years,” says Collins. “But be sure to let the recipient of any card know they need to use it or else they may forget they even have the card,” he says. “Plus the actual plastic card may have an expiration date even if the balance remains.”
According to the Federal Trade Commission (FTC), consumers should inspect cards before they are purchased to verify that none of the protective stickers have been removed. Make sure that the codes on the back haven’t been scratched off to reveal a PIN number and report any damaged cards to the store selling them.
Give the receipt to the person who will use the card. If the card is lost or stolen, report it to the issuer immediately (most provide toll-free numbers), though the issuer is not obligated to replace it. If the card is replaced, there may be an additional fee.
Finally, consider the financial condition of the retailer or restaurant where you’re purchasing the card before you buy. There are no guarantees that the card will still be honored if the company goes out of business.
For more information or to file a complaint about a retailer or restaurant-issued card, contact: Federal Trade Commission, 1-877-FTC-HELP, http://www.ftccomplaintassistant.gov
For help related to a bank-issued card, contact: Comptroller of the Currency’s Customer Assistance Group, 1-800-613-6743, customer.assistance@occ.treas.gov
