Did you know that gift cards are a $100 billion industry? They have rapidly become the gift of choice for Christmas, graduation, birthdays and “just because”. The National Retail Federation reports many of us will give and receive gift cards this holiday season.
Wondering how much we’ll spend? It averages $150 for each gift card. And let’s face it, it’s a fine solution for those who don’t know what to get for the person who has everything and for the recipient, it’s an ideal way to ensure they get exactly what they want. They’re easy to wrap and ship – in fact, you can easily email gift cards instantly, making them great for a forgotten birthday or anniversary, and you don’t have to worry about getting the wrong size or color.
Doesn’t get much better than that, right? In the past, gift cards were slightly problematic in that they usually had expiration dates. That’s no longer the case though, as part of the 2009 CARD Act saw to it that they have at least a five year shelf life. Ah, but there are fees associated with these perfect gifts. And gift cards are as varied as their credit card counterparts, with different fee structures and other terms and conditions.
In fact if a gift card lies dormant for too long, the non use fees could easily gobble up the value of the gift card. Worse, many don’t even know about the fees. Why should anyone have to pay twice, which is basically what happens when those fees are attached.
Promotional Gift Cards
There’s a new kind of gift card, known as a promotional gift card and the federal regulations don’t apply to these types of cards. These are usually issued by retailers and often include some kind of free gift or discount when the card is used. That’s all fine, but with no regulation or oversight, if you’re not careful, you could be wasting your money and the recipient’s time. The fine print reveals these gift cards are considered promotions, and that puts you in line for expiration dates and of course the possibility of unregulated fee structures.
Then there are the prepaid or reloadable debit cards that look and act like gift cards, but they’re anything but. These reloadable debit cards almost always come with monthly fees and reload fees if the recipient wants to continue using the card. If your recipient wants to check his or her balance, there’s a good chance a fee will be tacked on to the balance, which, of course, knocks out part of the “gift” in the gift card.
There are many gift cards with limitations on where they can be used. Those with traditional credit card logos, such as Visa or MasterCard, are often multi-use, which allows the recipient to use the card wherever he or she chooses. But with so many of these cards that are saturating the market, it can become confusing. Plus, if you buy your gift card online, you’ll likely be charged a fee for the convenience.
The third party sites for buying, selling and trading gift cards have also become quite popular. While there are a lot of great deals on these sites, it’s as important to read the small print as it is to read the terms and conditions associated with your credit card.
If Congress has its way, though, the ‘The Gift Card Consumer Protection Act’, which was just introduced last week, could eliminate those fees and expiration dates, making them even more viable.
Expiration dates and service fees and decreasing balances; those things are going to be a thing of the past as we move forward here,
Jessie Schmidt of the Better Business Bureau said.
If anyone believed these financial products were as close to being impenetrable for thieves as possible, there is always a bigger risk taker out there who’s more than happy to show consumers and the financial industry that where there’s a will, there’s a way. Schmidt said,
When you have those big racks of gift cards, people will take several cards. They’ll take their smart phone and snap a picture of backside of card that’s got the number on it. They call that number everyday to find out when that gift card has been loaded,
Wiping out the balance almost immediately is easily done, too. In fact, there have been some reports that the gift card balances were drained well before the recipient has had the opportunity to open the gift.
Even if the information isn’t stolen, consumers still must be aware. Up to twenty percent of these gift cards are never redeemed and as a result, it’s like they’re getting free money.
What are your thoughts on gift cards? Do you give or maybe receive them each year? Let us know your favorites and which ones you’ve found to be fee heavy.