Buying A Gift Card? Here's What You Need To Know

Over 77 percent of shoppers will buy at least one gift card this holiday season. If you’re one of them, be sure you understand exactly what it is you’re buying.

For those hard-to-shop-for people on your list, a gift card can seem like the perfect option—it fits any style and, according to the National Retail Federation, is the gift most requested.

While new laws implemented on August 22, 2010, by the Credit CARD Act regulate fees, expiration dates and other issues related to gift cards, you’ll still need to do a little homework to ensure the card you’re purchasing is the best value. Here’s what you need to know.

The type of gift card you’re purchasing

Typically, you have two main options: gift cards and pre-paid cards. With both of these cards, you pre-load a certain amount of money that your gift recipient can then redeem. But that’s pretty much where the similarities end. The Credit CARD Act’s new gift card rules don’t apply to prepaid cards. Which means you can be charged a set-up fee, a maintenance fee, a reload fee, a replacement fee (if your card is lost or damaged), and an inactivity fee.

And if you decide you get tired of all these fees can want to cancel your pre-paid card, you can be charged a cancellation fee and a fee for sending you a check for your remaining balance. If you’re thinking of buying a pre-paid card, be sure to read the fine print first.

Who has issued the gift card?

Gift cards are typically issued either by a store, such as Best Buy, or by a bank, such as Visa. Store-issued cards can be used at the store named on the card. Most store-issued gift cards can also be used on the store’s website, but be sure to check about any restrictions before you purchase.

Bank-issued gift cards, on the other hand, can be used at any location that accepts credit or debit cards from that bank. You may have to pay for the bank-issued gift card in addition to the amount you load on to the card.

Where to purchase gift cards?

Purchasing your gift card online may be more convenient than hitting a store, but you also may end up paying more. Shipping and service fees can range from $2 to $15, depending on how quickly you want to receive the card. Sending an online gift card to the recipient can help you avoid these fees, but if you want a physical card to give someone, purchasing it at a retail location may be your best bet.

Fees and expiration dates

The Credit CARD Act took on the fees and expiration dates previously associated with gift cards, but they haven’t been completely eliminated. Under the new law, gift cards cannot expire for at least five years and no more than one fee can be charged per month to the cardholder. In addition, inactivity fees cannot be charged until the card has been dormant for 12 months. However, no limitations were set on how high those fees can be once they do kick in.

And, in many states, if a card has been inactive for two or more years, the state can claim it as “abandoned property,” making that yet-to-be-used gift card in your wallet worthless.

Gift card scams

While it doesn’t happen very often, crooks can rob you of your gift card balance before you even give it away. Scammer pick gift cards off of display racks and either write down each card’s unique serial number or use a magnetic strip scanner to read and store the numbers. Then, the scammer calls the gift card phone number, enters in the unique number, finds out if the card has been loaded (by you), and goes shopping.

There are steps you can take to protect your gift:

• Purchase the card directly from the store issuing the card (or from a secure retailer’s website).
• Don’t buy cards from display racks.
• Examine the front and back of the card (scammers may remove the card from its attached backing to get at the magnetic strip or serial number and then reattach the card). Don’t buy any cards that appear to have been tampered with.
• Keep your receipt. This not only serves as your proof of purchase, but may be needed to replace the card if it is lost or stolen.

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