The National Retail Federation reports that gift cards are the most-requested holiday gift for the fourth consecutive year and expects gift card spending will reach nearly $25 billion this year. A recent survey found that 77.3 percent of holiday shoppers intend to buy at least one gift card. So chances are you received one as a gift, but do you know there are federal rules that govern these cards?
As of August 22, 2010, provisions of the Federal Credit CARD Act took effect and impose many new regulations on gift card issuers. These new regulations contain some powerful protections, and also a few surprises:
First, gift cards purchased on or after August 22 must hold their value for five years. The five year period restarts for each new dollar reloaded onto the card. Be aware: the card itself may expire, but not your money! If your gift card expires before five years and there’s still money left on it, contact the issuing company have your balance transferred to a new card. Companies are required to do this for free.
Second, the issuing company cannot charge an “inactivity fee” on your gift card until the card has not been used for 12 months. Previously some cards charged inactivity fees of $2.50 each month until the card balance reached zero.
Third, information concerning gift card fees, expiration date, and the company’s toll-free phone number or website must be printed on the card.
Fourth, while the Credit CARD Act contains many strong consumer protections from unscrupulous companies, it does not apply to universal prepaid gift cards. These cards typically have a major credit card company logo (e.g. Visa or MasterCard) printed on the front and can be used at any retailer. These cards may still expire and assess fees.
Fifth, federal and state laws don’t protect consumers who have gift cards to businesses that declare bankruptcy. In the past some consumers have lost money on their gift cards when the issuing store filed for bankruptcy protection. For example, when The Sharper Image filed bankruptcy in February of 2008, they stopped accepting gift cards from customers. While technically you can file a claim in bankruptcy court for the value of your gift card, the chances of receiving payment is slim.
The best advice for dealing with a gift card is: use it quickly. Delay in use risks losing money through inactivity fees or bankruptcy. Gift cards are not savings devices, they are meant to permit you to purchase a gift for yourself. Use the card and enjoy your purchase.