Consumers will remain vulnerable to hidden fees on general purpose gift cards as regulations on the same will only take effect on August 2010.
The House of Representatives, under the recently-enacted credit card Reform Act of 2009, prohibits banks and card issuers to put dormancy fees on recipients or customers, who have inactive gift cards. This law allows charging such fees if it is left unused for at least 12 months. It also prolongs the expiration date of gift cards and can be used for five years from the date of its purchase.
Meanwhile, the Consumers Federation of America (CFA) launched an awareness campaign about the truth on gift cards and the hidden charges to be shouldered by recipients or clients. In a brochure they passed along to consumers, it stated that gift cards are subject to monthly fees of as much as $4.95. Card issuers would start exacting inactivity fees as early as six months.
Other tangled fees in gift cards are $10 to $12 charges for replacement of a lost card; $15 fee for requesting a check for the remaining balance of the same; 3 percent deduction for foreign transactions.
Although the Congress did not remove all fees in the gift cards, it ordered the Federal Reserve to review if the amounts were suitable. This law also directed banks and card issuers to prominently put in their packaging the fees that go with the cards.
Earlier, a survey commissioned by CFA revealed that most consumers are unaware of gift card's tangled fees. Consumers or recipients often left frustrated when they discovered that a card's value depleted because of monthly maintenance fee. They are equally aggravated if they can no longer use their cards because it expired.
Survey showed that only 54 percent of consumers are aware of the monthly fee being deducted from the card six months after purchasing it.
The same survey also revealed that recipients cannot spend the entire balance because some stores do not allow split payment, using the remaining of a card's balance and other forms of payment to purchase.
CFA recommended that gift card buyers should read the packaging carefully, especially the card's expiration date. On the other hand, recipients should use a card within the six months to avoid shouldering fees.
It is estimated that purchase of gift cards, or sometimes called bank or cash cards, will reach to $4 billion and it is predicted to rise with the onset of this yuletide season as more consumers consider buying practical and hassle-free gift in the form of general purpose gift card.