What You Should Know About Your New Gift Card
By Marcia Frellick
December 29, 2011
These next few weeks are important — both for the people who just received handfuls of gift cards and the stores who want those cards put to work.
Retailers know that once you’re inside, you’ll probably spend more than the amount on the gift card. In fact, 58 percent will spend more than that amount, according to a study earlier this year by WSL Strategic Retail in New York.
So retailers are ready with sales and promotions to make sure shoppers with extra time on their hands — packing newly activated cards and feeling the holiday spirit — find deals they just can’t resist. And because retailers can’t count the cards as sales until customers spend the gifted amount, they want you to move fast.
“The classic strategy is multiple sales. You buy one at a certain price and get another at an additional amount off and it makes that second one so tempting that you buy it even though it’s a bit more than the gift card,” says Candace Corlett, WSL president.
These weeks are also important for shoppers who, if they don’t strike now, may lose track of the card or the desire to use it. Despite good intentions, up to 19 percent of gift cards will never be redeemed, Consumer Reports says.
“There are people for whom this money is burning a hole in their pocket and they are looking forward to getting so much for so little, because the post-holiday sales are so good,” Corlett says.
They’re the No. 1 gift request
For the fifth straight year, gift cards were the top choice on holiday wish lists, according to the National Retail Federation. And this season shoppers were expected to spend $27.8 billion on them.
Eight in 10 shoppers said they were likely to buy gift cards of all types and said they were likely to spend on average $155, which is the highest amount since 2007. That figure is up 6.7 percent from last year, according to the NRF’s 2011 Holiday Consumer Intentions and Actions survey.
New rules by the Federal Reserve last year and provisions of the Credit CARD Act of 2009 have added protections for gift cards and extended the time before they expire and also the time you have until fees can kick in for inactivity.
“When you get a gift card—say for $100—that balance will remain $100 for at least five years without any fees or expiration dates,” says Erin Rodriguez, a spokesperson for the Better Business Bureau. “But the plastic card itself can expire. Make sure you know that if the card says it expires a year from now, all that means to you is that you need to get issued a new card, but the balance will remain.”
Also, companies cannot charge fees until you don’t use the card for a year. That’s when it pays to read the fine print because after that year, “there’s no limit on the fee they can charge,” she says.
The new rules apply only to cards issued by banks or merchants. So if you have a reloadable card or any card not classified as a gift card, read the terms carefully. All fees must be clearly disclosed on the gift card or its packaging whether the card was purchased online, by phone or in person.
Senator warns of scams
It’s the packaging of some cards that concerns a U.S. senator who warns consumers to check gift cards for any signs of tampering.
In a press release this month, U.S. Sen. Charles Schumer (D-NY) warns of scammers who copy activation numbers off the backs of some cards you see hanging in store displays. Thieves keep checking to see if the card they skimmed in the store has been activated and then use that information to make online purchases.
If the access code is compromised, the value of the card can be drained before the person even gets the gift, he says.
Schumer is calling on the National Retail Federation and the Retail Gift Card Association to urge their members to better conceal codes on cards in stores by creating packaging that obscures the codes or placing the cards behind counters and out of reach. He says he’d also like to see retailers refund the value of cards that have been stolen by scammers.
But Carman Wenkoff, chairman of the board for the Retail Gift Card Association, says fears about gift card safety are largely unfounded.
“We don’t see this as a problem,” he says. “There are a lot of assumptions that people have made about gift cards from when they first came out about them being vulnerable to fraud, and almost all of those assumptions have been dealt with since gift cards became mainstream in the last 10 years.”
He adds: “The most common way retailers deal with fraud has been to put PINs on the card where you can have a scratch-off area with a PIN. That way, you’d need to physically damage the card and it would be obvious that it had been used. Retailers are ultimately responsible for the fraud on the cards so they take whatever measures they can to make sure that they’re safe. Most retailers also have pretty sophisticated fraud algorithms behind the scenes to make sure the cards are safe to use.”
He said the greater concern is usually losing the card. He recommends registering the card with the retailer if that service is offered. That way, if you lose the card, you can have the balance transferred onto a new card.
Consumer Reports says when you give a card, add a copy of the terms and policies and the receipt, which is often needed if the card is lost or stolen.
If your issue with gift cards is not deciding when to spend them or wondering whether they are safe, but just that you’re not happy with the ones you’ve got, you can trade them for another retailer’s card or get most of the value back in cash at sites such as PlasticJungle, GiftCardBin, GiftCardRescue and CardPool.com. It pays to comparison shop here, since the amount you’ll get differs by site.