29 Nov Holiday Warning – The Dangers Of Gift Cards
Gift cards are the fastest-growing retail and restaurant product to come along in the last ten years. However, there are traps for the unwary consumer. In August 2010, a federal law will ban inactivity fees or monthly service charges on gift cards for the first year after purchase and will prohibit fees on gift cards that have been used in the past 12 months. Since 2005, gift cards in Connecticut are not allowed to have an expiration date or a dormancy fee for inactivity. Other states have followed suit.
Each year, roughly 10 percent of the value of all consumer gift cards remain unspent, while another percentage is forfeited to monthly fees. Nearly 20% have trouble spending the entire balance because a store refuses to split payment on an item costing more than the card’s balance. So either you sacrifice the balance on the card or you buy something you really don’t want. Certain others tack on an extra fee just to purchase them.
Retail gift cards sold by stores, shopping centers and restaurants, generally can be used only with a specific merchant. Bank gift cards carrying the logo of a network like VISA or MasterCard offer more freedom, but these cards often cost an extra $4 to $7 to buy, and some are subject to monthly fees as high as $4.95 as early as six months after purchase.
Tips for buying and using gifts cards:
If buying; Buy only cards that clearly disclose information about the initial cost, monthly fees, and expiration date.
If receiving: Try to spend the entire balance within 6 months, keep track of your balance and use your gift card at stores that accept split payments.
And if all else fails, there’s always cash. It comes in various amounts and sizes and is accepted everywhere.