Gift cards: What you need to know about that plastic you got for Christmas
More than likely, you either gave or got a gift card today. Gift cards have become big Christmas business. The National Retail Federation expected total spending on gift cards to reach nearly $25 billion this year. Gift cards were the most-requested holiday gift for the fourth year running, the retail trade association said.By: Sherri Richards, INFORUM
More than likely, you either gave or got a gift card today.
Gift cards have become big Christmas business. The National Retail Federation expected total spending on gift cards to reach nearly $25 billion this year. Gift cards were the most-requested holiday gift for the fourth year running, the retail trade association said.
Many retailers even carry specialty gift packaging for placing those gift cards under the tree.
Individual consumers were predicted to spend an average of $145.61 on gift cards this year, up from $139.91 last year. The National Retail Federation’s holiday survey found 77.3 percent of shoppers were going to buy at least one gift card.
Gift card givers say gift cards are easier and faster to buy, and they like that the cards allow the recipient to select his or her own gift.
Some people who choose not to give gift cards are concerned that the card would expire or have added fees, the retail federation found.
New federal legislation that went into effect this summer eases some of that worry. But it’s important that gift card givers and getters understand their fine print and potential pitfalls.
New rules
New federal rules governing gift cards went into effect in August. Here is a summary of these rules, from the Better Business Bureau of Minnesota and North Dakota:
- Gift cards cannot expire for at least five years.
- An inactivity fee cannot be charged until the card has not been used for 12 months.
- No more than one fee can be charged to the cardholder in a single month.
- Information printed on the card must disclose fees and expiration date and provide a toll-free phone number of website for more information.
The federal law is largely moot in states with stronger laws, including North Dakota and Minnesota. In North Dakota, gift cards cannot expire for six years. In Minnesota, cards are not allowed to expire. Fees are prohibited in both states.
But these state rules apply mostly to store-specific gift cards sold in those states. They don’t generally apply to universal prepaid gift cards.
These cards typically have a major credit card company logo printed on the front and can be used at any retailer. These cards may still expire and assess fees, said Parrell Grossman, director of the Consumer Protection Division of the North Dakota Attorney General’s Office.
“Consumers have to pay attention to cards they’re purchasing and giving as gifts or that they receive as a gift,” Grossman said.
The new federal rules did slightly change policies for gift cards to Fargo’s West Acres Regional Shopping Center.
Before, fees were taken off 12 months from the date of purchase. Now fees are taken off after 12 months of inactivity, said Mall Manager Rusty Papachek.
This monthly fee of $2.50 is automatically deducted each month from the card balance until the balance reaches zero, according to information at www.westacres.com.
Papacheck said the mall has always been upfront about the fees on its gift cards.
“We don’t like to charge fees,” Papachek said. “It’s the company we’re using. The vendor charges fees.”
He said the new rules are better because it means fewer fees will be assessed.
Other concerns
Besides fees and expiration dates, consumers should be mindful of other risks that come with gift cards. Generally, the best advice for avoiding most of them is to use the card promptly.
Federal and state laws don’t often protect consumers who have gift cards to businesses that declare bankruptcy or shut their doors.
An exception could be if the retailer sold gift cards knowing it was going to close soon, Grossman said. “We believe that would be a violation of the law,” he said.
You’re also usually out of luck if the gift card or certificate is lost or stolen, the Minnesota Attorney General’s Office said. It advises knowing the rules for how the company deals with that situation.
If a separate document includes information about fees, expiration dates or other rules, give that information to the card’s recipient, the Minnesota office advises in a consumer tip sheet.
The tip sheet also advises only purchasing cards from reputable merchants and retailers.
The American Institute of CPAs, through its 360 Degrees of Financial Literacy website, warns consumers against buying gift cards at “bulk gift card places” like a grocery store.
“A common scam is to go into those stores and take (not pay for) a handful or two of the cards, bring them home and copy down the number, and then bring them back to the store and put them back on the rack,” the institute says.
When the card is purchased and activated, the scammer can use the numbers.
“So only buy gift cards from the specific place they are for, and only get them right in front of the registers,” the institute says.
Many cards cover the numbers with a scratch-off coating to protect customers from this sort of scam.
Also, be leery of selling the gift card you got for Christmas online – you may not get the promised cash – and of buying gift cards sold online for a discount.
“It’s purchasing a pig in a poke. You don’t know what, if anything, you will receive,” Grossman said.
Gift card tips
Laws
North Dakota: Gift cards cannot expire for six years and cannot assess fees. The law covers prepaid calling cards but does not cover cards linked to bank accounts or used at many, unaffiliated merchants.
Minnesota: Gift cards cannot expire and cannot assess fees. The law does not include debit cards, prepaid calling cards, cards linked to bank accounts or used at multiple, unaffiliated merchants.
Readers can reach Forum reporter Sherri Richards at (701) 241-5556
Tags: gift cards, business, money, gifts, holidays, christmas
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