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Consumer Protection Laws for Gift Cards

Posted By Miranda Marquit On 01/15/2013 @ 12:07 pm In Personal Finance | 7 Comments

Now that the holiday season is over, you have a chance to look through your spoils. Chances are that you probably received a gift card or two. I received a few gift cards, and gave gift cards as well.

You do have to be careful with gift cards, though. Even though there are some consumer protections in place for those who use gift cards, you might still be subject to fees and other penalties when you use a gift card.

The CARD Act and Gift Cards

Back in 2009, Congress passed the Credit CARD Act, and in it, lawmakers included some helpful protections for consumers when it comes to gift cards. Gift cards can’t expire within five years of the activation date. Additionally, issuers can’t start charging inactivity or dormancy fees until after a year.

While these protections are helpful, they don’t keep you from being charged to activate the gift cards. Many general purpose cards, like those offered by Visa and American Express, cost between $2.95 and $6.95 when you purchase the card. This activation fee is usually paid by the buyer/giver. On top of that, if you purchase a gift card online, you might end up paying shipping charges of between $3.95 and more than $20. Some issuers only offer a two-day option that can be costly when you arrange to have the gift card physically shipped to the recipient.

State Laws and Gift Cards

Federal law provides a bottom for regulation, and states can build on those regulations. Some states, like Connecticut and Minnesota, ban any expiration date for gift cards. Additionally, other states, like Colorado and Montana, don’t allow inactivity fees. Depending on the state the card is sold in, you might have more protections than you think.

It’s possible to see what statutes apply to gift cards [3] when you visit NCSL.org. This site offers a helpful and comprehensive chart laying out the laws related to gift cards so that you can see what your protections include.

Avoid Fees and Costs Related to Gift Cards

The best way to avoid fees and other costs related to gift cards is to purchase cards for specific retailers. The gift cards that most often come with activation fees are general purpose cards. If you buy a card for a specific store or restaurant, though, you are more likely to avoid fees. Many individual retailer cards don’t charge dormancy fees, either. If you want to avoid shipping costs, check to see if there is an option to send the gift card electronically.

It’s also important that you not mix up a prepaid debit card with a general use gift card. With AmEx and Visa and other issuers offering prepaid debit cards [4], you might grab one of those instead of a gift card. Many prepaid gift cards come with more fees than gift cards — and they don’t have the same consumer protections that you see with gift cards. Make sure you are careful about what you pick up at the store.

Gift cards can make great gifts. Just be sure that you understand what you are getting, and you know the costs that can reduce the value of the card.

(Photo: Damian Gadal [5])


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[1] Tweet: http://twitter.com/share

[2] Email: mailto:?subject=http://www.bargaineering.com/articles/consumer-protection-gift-cards.html

[3] what statutes apply to gift cards: http://www.ncsl.org/issues-research/banking/gift-cards-and-certificates-statutes-and-legis.aspx

[4] prepaid debit cards: http://www.bargaineering.com/articles/prepaid-debit-good-idea.html

[5] Damian Gadal: http://www.flickr.com/photos/23024164@N06/8282280449/

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