Unwrap the Details of Gift Cards

December 11, 2015 | Mission Fed

Gift cards may be just the right present to give—or receive. They’re easy to purchase, and you don’t have to worry about finding the right color or size. There are gift cards that can be used practically anywhere, like VISA Gift Cards or ones that can be used at favorite stores, restaurants or theatres and amusement parks. Plus, they’re easy to wrap and ship. But before you purchase or use gift cards, make sure you understand the rules.

It’s not uncommon to find an old gift card at the bottom of a drawer. I know from firsthand experience. If you have old gift cards sitting around, you should consider using them soon. Federal rules say that gift cards cannot charge inactivity or service charges for 12 months. After that, every month that gift cards sit around, their value could be decreasing because of fees.

Also under current federal law, gift cards that will expire in less than five years cannot be sold. So if you find an old gift card lying around, call the phone number on the card to see if funds are still available. If the card still has value, a new card must be issued at no cost to you.

Not all gift cards or prepaid reloadable cards are created equal. Make sure you understand the different rules that apply to different types of cards. Here are some examples:

Network branded gift cards

These cards will have a logo like VISA, American Express, Discover or MasterCard, and can be used wherever the network credit cards are used. They may or may not be reloadable, which means the recipient might be able to add more money to them. There are different rules if they’re reloadable—see below.

Store gift cards

Sold by a single merchant or group of merchants, these cards can only be used at those specified stores.

Reloadable prepaid cards

These are cards that are not marketed and sold as gift cards. These cards can be used the same way you’d use reloadable gift cards, but the rules that cover these cards are not the same. If a card is not sold as a gift card, then the federal rules that cover gift cards (and add protections for consumers) don’t apply. For example, for reloadable cards, the card issuer might immediately start charging fees, like monthly service fees.

When giving a gift card, be sure you give the receipt and terms and conditions to the recipient. The terms and conditions are sometimes included in the original packaging, so make sure you wrap it all together. Also be aware that when a retailer goes out of business, gift cards they have sold may not be redeemable. Also, if store locations close, it may be harder for the card recipient to shop with their card—unless they can also shop online. If you receive a gift card, read the fine print so you will know if there are any associated fees or special conditions of use. And be careful where you keep your gift cards, as some stores may not replace them if they are lost. Treat the card like cash, especially if the issuer will not replace it, and keep your card until you are sure you will not be making any returns, since some merchants require that refunds be added back to the card.

Just like holiday greeting cards, gift cards should be opened and put to good use sooner, rather than later. Take my word for it, these cards can be easily forgotten--when they’d be put to better use for the present, meal or experience that you really wanted.

Happy holidays!

For more information, please refer to this article from the Consumer Financial Protection Bureau:

Mission Fed

Mission Fed

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