Tips for Buying and Using Gift Cards

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Gift cards will be a hot holiday gift item once again in 2010. A National Retail Foundation survey shows that almost 57 percent of adults want a gift card, ahead of clothing, books, entertainment and electronics.

The CARD Act provisions regarding gift cards, which went into effect in August, will benefit consumers during this upcoming holiday season.

These rules apply to both “closed-loop” gift cards – cards from specific retail stores, merchants and restaurants – and “open-loop” cards, such as gift cards from MasterCard, American Express or Visa.

Here are some of the legislative changes that affect gift cards:

  • Limits on expiration dates: The money on your gift card will be good for at least five years from the date the card is purchased. Money added or loaded on to the card must also be good for at least five years.
  • Replacement cards: If your gift card expires and there is unspent money, you can request a replacement card at no charge.
  • Fees: The law bans dormancy, inactivity and service fees on gift cards unless there has not been any activity for 12 months and the issuer clearly discloses all fees on the packaging. In those cases, consumers can only be charged one fee per month. Check the gift cards that you received during the holidays last year – if you received a card last December, you could soon start paying a dormancy fee.

In July, Congress passed legislation to extend the effective date for on-the-card disclosures until Jan. 31, 2011, for cards issued prior to April 1, 2010. After that date, all gift cards must be compliant.

“Gift cards are easy to give, but they are also easy to forget. They may hide in your wallet or drawer for a long time,” says Bill Hardekopf, CEO of and author of The Credit Card Guidebook.

“The CARD Act helps preserve the value of the card so that fees can’t erode the value of the card before they are used.”

Consumer Tips for Buying Gift Cards:

  • Buy a card only from a merchant you trust.
  • Make sure the store is in a good financial position.
  • Read the card’s fine print to determine all the fees associated with the card.

Consumer Tips for Using Gift Cards:

  • If you receive a gift card, use it as soon as possible. Don’t put it aside and out of sight. Use it before you lose it or forget about it.
  • Check the terms and conditions of the card you receive to see if there are any fees associated with the card.
  • Gift cards from major credit card networks can be used at any retailer that accepts their credit and debit cards.
  • Keep you budget in mind, even when spending the gift card. The Consumer Reports poll shows that two-thirds of consumers spent more than the card’s value.
  • If the gift card is from a credit card network, write down the card number. If it is lost or stolen, the card can be canceled and a replacement issued. The replacement fees range from $5.95 to $12. Most store cards can’t be replaced if they are lost or stolen. They are treated as cash.
  • Keep the card, even after the balance is depleted, until you are sure you won’t be returning any of the items that you purchased with it. The retailer may require the card with the return.
  • If there is a problem with the card, contact the store or financial institution that issued the card. If that doesn’t resolve the issue, contact the Federal Trade Commission at 877-FTC-HELP.

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