Did you know that the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 has provisions that affect gift cards? Neither did I. But on Aug. 22, 2010, the following provisions take effect for gift certificates, store gift cards and general-use prepaid cards (usually branded by Visa or MasterCard).
Fee and expiration limits.
- Inactivity fees can only be applied after the gift card or gift certificate goes unused for 12 months or more.
- Terms and fees must be disclosed to the user in advance.
- Only one fee per month may be applied.
- Gift cards and certificates can’t expire until five years after initial issuance, or since it was last loaded with money – whichever is most recent.
- Fees not covered by the CARD act include issuance fee and sales fee for purchasing the card.
Hidden increase in fees.
While this sounds great, there is likely going to be an increase in the fees that are still allowed. That’s because it’s going to cost issuers much more to simply track and manage dormant cards for up to five years – 3 years longer than the typical expiration period today.
According to Aite Group LLC, a Boston-based research firm focused on the financial services industry, there are approximately 50 different fees that can be applied to gift cards. The most common are for each transaction, card replacement, call to customer service and checking the card balance.
These provisions do not cover paper gift certificates, re-loadable cards not marketed as gift cards (such as Visa or MasterCard prepaid cards), telephone cards, and loyalty award or promotional gift cards.
The gift card industry needs some serious adult supervision. Like credit cards, gift cards are usually ripe with numerous fees and traps for maximizing the issuers’ profits while minimizing the cardholders’ benefits.
Somewhere in between gift cards and credit cards, are general-purpose reloadable cards branded by Visa and MasterCard, which are much better deals, with no debt, less fees and more usability.
In particular, look for the prepaid reloadable cards available online rather than at retail stores: they are lower cost, issued in the name of the cardholder, and valid for 2 years.