Gift Cards May Carry Fees, Expire

More people are giving gift cards to friends and relatives at the holidays, but those who give the cards and those who get them should be aware that they're not completely consumer-friendly. Fees and expiration dates can trip up unwary users, and there can be problems replacing lost cards.

This year, Americans are expected to buy more than $80 billion worth of gift cards, a 20 percent increase from 2005, according to the TowerGroup research and consulting firm in Needham, Mass.

About three-quarters of the cards are issued by shopping malls, restaurants or retailers for use at specific sites. The rest are "universal" cards sold by banks and credit card companies that can be used in most places where debit and credit cards are accepted.

Brian Riley, a senior TowerGroup analyst, said holiday gift cards are increasingly popular because they're widely available and are considered more thoughtful that cash.

"It's not like putting $20 in somebody's hand, which comes across as showing almost no thought at all," Riley said. "A gift card, say for a do-it-yourselfer, can make someone think that I thought they'd actually like to go to Home Depot."

Still, the holiday cards are not without problems.

A study by the Officer of Consumer Protection in Montgomery County, Md., found that some retail gift card issuers did not do a good job of disclosing maintenance fees or expiration dates.

But half the 40 retail cards that were analyzed won high ratings because the issuers offered the potential for replacement of lost or stolen cards, the ability for the cards to be used in a store and online, and no policy of imposing an expiration date.

The study found that bank- and credit card company-issued cards provide more disclosure — especially since the Treasury Department's Office of the Comptroller of the Currency issued new guidelines earlier this year.

But there generally are more fees on these cards than on retailers' cards, including purchasing fees, processing fees and monthly maintenance fees. And the fees can be considerable — as much as $4.95 a month for "maintenance" starting 12 months after issue or $15 for a replacement card.

With bank cards, consumers also may find that transactions are rejected if they are trying make a purchase for an amount greater than the value on their cards, the study said.

It advises that gift card buyers "look carefully at the prepurchase disclosures of terms and conditions." It said that "if terms are not given, or appear too cryptic to be complete, do not buy it."

People who receive gift cards should be aware of the pitfalls, too, said Ellen Cannon, assistant managing editor at, an online financial information service based in North Palm Beach, Fla.

In most cases, fees on unused balances kick in after a year "so it's best to use the cards before the fees start eating away at the value," she said.

Cannon pointed out that about 80 percent of those who receive gift cards use them by the end of January.

"It's a treat for the receiver, and sales are good at the beginning of the year," she said. "With preteens and teenagers, it's their only money so they spend it fast."

Recipients also want to protect themselves in case the gift card is lost. Some issuers require that they be registered online; others won't replace them without the original purchase receipt. Many charge a fee for the replacement card.

An added benefit of registration, Cannon said, is that gift card holders can then go on to the Internet and check their card's balance.

TowerGroup's Riley said consumers historically have not gotten full value from gift cards. TowerGroup estimates that nearly $8 billion is lost due to unredeemed value, expiration or loss of the cards.

He suggests consumers get receipts when they use the cards to help them keep track of their balances. He also suggested families consider sharing them.

"I know that if I don't completely use a gift card, my kids will take it — especially if it's for a record store," he said.