January 06, 2011
Credit CARD Act of 2009 and Your Holiday Gift Card
Posted by Christine Hurt

The Federal Reserve estimates that 95% of Americans have given or received gift cards.  Gift cards are easy to give, but they are also easy money for card issuers.  That mega bookstore gets your $50 now free and clear, but the odds of the entire gift card being used are much less than 100%.  And when the gift card isn't used, that's gravy to the card issuer.

Originally, to hurry this process along, gift cards were given short expiration dates.  However, technically, the value left on expired cards belonged to the state treasury as abandoned property.  So, a savvy consumer could just go in and ask the retailer to either honor the gift certificate or show them the documentation of when the value was forwarded to the state.  So, card issuers instituted the dreaded monthly fee for nonusage.  If the store could deduct faster than you could remember where you put the card, then the store won.  Some states, including Illinois, passed laws limiting this practice, but this holiday season is the first time a federal rule has covered all gift cards.  Under regulations promulgated pursuant to the Credit CARD Act of 2009, effective August 2010, you should be able to save your card until you need a little mid-year pick-me-up, or maybe even to regift next holiday season.

Under the new rules, card issuers may not deduct any fees for non-usage until the card has had no activity for one year, and the terms of such fees must be disclosed on the card itself.  ("Activity" is a sale or adding value to the card, not checking the balance.)  And, the card must not expire for at least five years from the date of issuance.  If the card is reloadable, meaning more value can be added to the card, then those funds will not expire for at least five years, even if the card does.  In that case, the holder of the card can request a replacement.

Of course, there are exceptions.  The rules are meant to apply to cards for personal, family or household purposes; therefore, cards given to employees and other business partners are not covered.  In addition, the card must be marketed or labeled as a gift card or gift certificate.  The cards could be for a particular store, an affiliated group of stores, or a mall, or even a general-use card branded by MasterCard or Visa.  The rules do not apply to prepaid cards meant to substitute for a checking account, telephone cards, rebates, cards for a particular good or service, loyalty programs or customer bonus cards.  

This last one almost got me.  This season, I bought $100 worth of gift cards at a popular national steakhouse chain.  In return, I got a free $20 bonus card.  The bonus card was specially marked and had a short expiration date, which I only noticed as I was regifting it for one of the many wonderful home remodeling workers I met this December.  So, if you were given a gift card, check to see if it is marked as a bonus card or has an expiration date on it before assuming that you have a year or more to use it.

Interestingly, many card issuers seem to have responded by not having nonusage fees or expiration dates on gift cards.  Maybe the prospect of putting all that small print on the card was just too much!

Finally, what if you received a gift card for a hardware store but you really need new running shoes?  There are many websites where you can sell unwanted gift cards for less than face value, purchase gift cards at a discount, or even swap.  They seem to sell at about a 9-12% discount from face value, so I assume that you can sell your card at a slightly larger discount.  These sites seem only to purchase certain gift cards, for amounts over $25, with no expiration dates.

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