Avoid pitfalls with gift cards

Last minute shopping is almost inevitable during the holiday season and so are gift cards. These are impersonal and easily available and make a great gifting idea when there is no time to choose gifts. The retail merchants also love gift cards because people generally tend to lose them or forget to use them. According to the most recent consumer reports at least 27% of the people who received gift cards have not redeemed at least one or more of those gift cards. As per the Tower Group consumers have forfeited close to $8 billion the previous year either due to loss of gift card, expiry or because of unredeemed gift cards.

Gift cards could be a rip-off at times as they come with a lot of hidden fees and both the recipients as well as the givers must be aware of their rights.

Most of the reputed ones such as Wal-Mart, Target, Best Buy and such others sell their house brand cards and at face value. For instance, a $50 Wal-Mart card can be purchased for $50 and there is no expiry date. If the same card is purchased online, the shipping is done by Wal-Mart for free through the USPS and it takes about 7 to 10 days to deliver. Faster shipping means it could cost $15 and would take one day to be delivered.

Most often, Visa, MasterCard, American Express prepaid gift cards are all laden with hidden charges.

However, this year new protections were in place for gift card users which includes a set of rules by the Fed which was in effect in August 2010 and a part of the credit card act. As per the new rules:

• The money on the gift card is valid for 5 years after purchase of the card. Funds that are added on later to the card are also valid for the next five years.
• There should be no hidden fee and all the charges must be stated on the card or on its packaging.
• There are lesser gift card fees that are now allowed. Restrictions are applicable to maintenance fees, usage, inactivity as well as charges for adding funds to the card.
• Inactivity fees might be charged if the card hasn`t been used for at least a year.

Each state will have its consumer protection laws that might exceed fed rules and regulations. Use the Consumers Union handy guide to check it out.

Jennifer Brown

Jennifer Brown, an external business consultant working with a Fortune 500 company, has years of experience to her credit. Despite having a busy schedule through the day, she takes time out to write articles dealing with credit cards, payday loans and other financial aspects. She has completed her Bachelor degree in Financial Services from Columbia University and has been actively involved in various activities for the betterment of society.