Gift cards, explained
WASHINGTON -- I get a lot of gift cards and I bet you do too.
Since it's often hard to buy for people, our friends and family have resorted to giving us these cards. Once seen as the lazy person's go-to present, gift cards have become a practical and acceptable way to give.
This holiday season, eight in 10 consumers said they would be buying gift cards, according to an annual survey by the National Retail Federation. Shoppers are expected to spend an average of $163.16 on gift cards, the highest amount in the survey's 11-year history. The gift-card market is estimated to top $130 billion in sales by 2015, according to research by CEB TowerGroup.
Since 2010, gift certificates, store gift cards, and general-use prepaid cards come with some pretty good protections, thanks to the Credit Card Accountability, Responsibility and Disclosure Act of 2009, also known as the Credit CARD Act.
So as you begin your holiday shopping -- some of you before Thanksgiving dessert is served -- here are some tips if you plan on giving a gift card:
-- Expiration date limits. The money you load on a gift card is good for at least five years from the date the card was purchased. Any funds that might be added to a gift card later must also be good for at least five years. Tip: A friend gave me a gift certificate for a chain restaurant. I put up the certificate for safe keeping until a special occasion when I might go to the pricey restaurant. The problem is I forgot about it. I recently found it as I was organizing my office. But thanks to the CARD Act, I had a really nice meal several years after I got the certificate. To eliminate the possibility of losing gift cards, create a file folder and put the cards in it immediately after receiving them.
-- Leftover money. A gift-card recipient may still be able to get a replacement gift card, even if it's expired, if there is still money left on the card. If your card expires and there is unspent money, you can request a replacement card at no charge, according to the Federal Reserve. Tip: When you give a gift card, make an effort to highlight the expiration date, which is often in small print on the back of the card. If the person you are giving the card is like me, he or she might want to save it for a special occasion to honor your thoughtfulness. But like me, he or she might tuck it away somewhere and forget about it.
-- Fee limits. I hate to admit it, but I've lost the value of gift cards often because of fees. However, many fees are limited because of the CARD Act. Generally, fees can be charged if you haven't used your card for at least one year. Restrictions apply to maintenance fees, inactivity fees for not using your card, usage fees, or fees for adding money to your card. Often general-purpose gift cards will charge a monthly fee after 12 months of inactivity. Gift cards issued by banks, malls and credit-card companies are more likely to have expiration dates or activation, maintenance, inactivity and transaction fees. Tip: Understandably, if you want to give someone the maximum flexibility to shop at any store, you might buy a general-purpose gift card. But help people out by again pointing out any fees that could be assessed on this type of gift card. Just include a little note or sticker that lists the date at which fees will be assessed. After all, if recipients don't use the card, it's money wasted.
If you get a gift card, be careful that you don't overspend when you redeem it. A survey last year from the TowerGroup found that 30 percent of gift card recipients spend $25 more than the value of the card.
Oh, and I love this tip from Card Hub: If you have an old gift card that's still good, but it's looking a bit worn, check to see if you can trade it in for a new card. Regift the card if you're looking for a gift for someone. But make sure it has the full value displayed on the front of the card.
Why would someone regift a gift card?
Perhaps the card is from a store the first recipient doesn't patronize. As long as the gift card is for a service or store the regifting receiver would like, I don't see the problem. Think of it as recycling. Besides I won't tell and neither should you.
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