gift_card

I figured this is a unique holiday season compared to previous years. I was thinking about the likelihood of people choosing to re-gift unused gift cards from last year and risks involved.  The re-gifting episode on Seinfeld was funny for a reason. Things don’t always turn out the way you planned. I’m not saying that you’ll give or get a label maker where the labels don’t stick and the post office will keep all your stuff, but what if your old gift cards don’t have as much value as you thought they did?

This is important not only for re-gifting possibilities, but also for your own spending. So many gift cards have monthly fees called ”inactivity fees,” “administrative fees,” or “dormancy fees.” This is unfortunate because the original purchaser of a gift card intends for the recipient to get the full value of the card. Lucky for consumers, many states are trying to pass laws to crack down on excessive gift card fees. The retailers justify these fees because an unused gift card sits on their books as a liability that has not been turned into revenue yet. (If you would like an in depth explanation behind the accounting, just e-mail me, I’ll break it down into debits and credits for you.)

Some cards have fees that start as early as 3 months from the day the card is purchased deducting up to $2.50 of the card’s value per month. The best thing to do is check out what fees are incurred on any gift cards you may be holding and to keep up with your balances. I’ve only heard of one instance where a company charged a card holder to check the balance on the card over the phone. So hopefully that won’t happen and balances will be easy to monitor. In the cases that fees begin to be charged, its important to know the state laws that may offer protection. I have located a website that provides a breakdown of state laws that is updated periodically.

I think that the state of New Jersey has one of the toughest and most consumer friendly laws that bans anys “dormancy fees” until 24 months after the date of sale or last use and limiting the fee to $2 month. In addition, prominent disclosure of the terms are required.

In New York, former Attorney General Eliot Spitzer went as far as filing suit against Simon Property Group (the largest mall owner and operator) for charging administrative fees after only 7 months after the cards were purchased. New York’s gift card law went into effect Oct. 18, 2004 prohibiting retailers from charging fees on gift cards until the card has been unused for 12 months.

All of what I have shared only covers retail gift cards. The bank cards (American Express, Visa, and Mastercard gift cards) that seem better than retailer cards because they are not limited to one store chain actually have the worst fees of any card. For example, Visa gift cards charge an activation fee at the time of purchase, usually around $5. In addition, this card charges a monthly maintenance fee starting in the first month. None of the state laws mentioned above have any impact on bank cards, so they should just be avoided all together.

In the end, cash is king, but if you do have any gift cards, spend them ASAP before its too late!

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