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The provisions of the Credit CARD Act of 2009, which stepped into effect Monday, February 22nd, introduced many new protections for credit card users. The new law aims to make gift cards more user-friendly as well; however, consumers will have to wait until August 22, 2010 for these new protections to become effective. Still, if you familiarize yourself with the current downside of gift cards, it’s easy to avoid their drawbacks in the meantime.
At present, the two major drawbacks of gift cards are that some come with expiration dates and monthly inactivity fees. Under the new credit card law, gift cards can’t expire for at least five years after purchase. In addition, gift card issuers cannot assess a monthly inactivity fee until at least one year after the card was sold. The new credit card rules also stipulate that the terms of the card, including inactivity fees and expiration dates, must be printed directly on the gift card, providing purchasers and receivers with easily accessible information about the key terms.
The new rules will apply to both bank-issued and store-issued gift cards. Bank-issued gift cards, are generic cards issued via Visa, MasterCard, Discover, or American Express. Store or merchant-issued gift cards, on the other hand, are issued by specific vendors, such as department stores or restaurants. Bank-issued gift cards are increasingly popular due to their ease of use; a bank-issued prepaid gift card is essentially like a debit card, which can be used to at any number of physical or online stores. The holder of the gift card may need to register his or her name and address before using a gift credit card online, but otherwise internet purchases are as easy to make with gift cards as with credit cards.
If you’re considering purchasing a gift card for someone before the new law steps into effect, you can protect yourself against card expiration dates and inactivity fees by doing a bit of shopping around. The four major credit card companies, American Express, Discover, MasterCard and Visa all offer expiration-free gift cards. Some also offer free shipping, but they all charge a purchase fee.
Please note, however, that while funds on gift cards issued through the major credit card companies won’t expire, the card itself features a “valid thru” date to satisfy the needs of merchants, who require plastic expiration dates during transactions. After the “valid thru” date, a replacement card (free of charge) must be acquired. If the recipient of the gift card is not aware of this, he or she may find themselves unexpectedly unable to use their card (until a replacement arrives in the mail), or even worse, may presume that the card has expired.
For store-issued gift cards, Amazon.com, Borders, Home Depot, and Starbucks are only a few of the many merchants who offer expiration-date free cards that also come with free shipping. In addition, prepaid cards from these merchants come without a purchase fee.
To make it easier for you to compare, BankRate.com’s 2009 Gift Card Study offers a sheet listing the nation’s top bank- and store-issued gift cards, which allows you to easily compare gift cards against different criteria, such as free shipping, purchase fees, expiration dates, etc.
Prepaid gift cards can also be purchased directly from banks, however, there may be unique bank-applied fees and restrictions associated with card. It is always best to check with the bank to see which extra rules may apply.
If you currently have an unused gift card, to play it safe, contact the gift card issuer to find out what fees and conditions come with your particular card. Customer service numbers and websites are usually listed on the back of gift credit cards. Familiarizing yourself with the issuer’s policies now can prevent inconveniences down the road.
It’s also important to remember that even after spending the entire balance on a gift card, don’t throw it out just yet; if you decide to return any purchases, you will need to present the card so that the merchant can credit it for the items bought.
