One of the most popular gifts during the holiday season is the gift card. Recipients can buy what they want, and it simplifies the process for givers. However, it is important to realize that sometimes gift cards are far from a great gift. Depending on the terms and conditions associated with the gift card, fees and expiration dates may apply. While the recent rules have gone into effect to limit the problems associated with fees and expiration, there are still some things that you need to be aware of:
Gift Card Fees
The new gift card rules limit certain fees. Gift card balances can’t be charged service fees and inactivity fees until 12 months of no use have passed. Once that milestone has passed, only one fee per month can be deducted from the balance. While this protects the recipient, it doesn’t do much for the giver. It is still possible for gift cards to charge one-time fees, such as an activation/issue fee, or a fee to replace a lost gift card. On top of that, prepaid cards designed to be reloadable are exempt from the monthly fee rule. So make sure you understand what sort of prepaid card you are getting for a gift.
Also, consider the cost of shipping the gift card. Some cards cost as little as $0.99 to ship, while other retailers may charge $5.95 or more to send out the card. If you don’t want to pay a shipping fee for a physical card, consider giving a e-mailed gift card.
The Credit CARD Act requires that expiration dates for gift card balances be at least five years into the future. However, it is important to note that there is a difference between a gift card balance expiring and the physical card expiring. A physical card may expire before the balance does. The good news is that a replacement card has to be provided at no charge. But the recipient may have an unpleasant surprise at a checkout register if he or she does not realize that the card needs to be replaced.
One of the trends gaining traction is the purchase of discounted gift cards. In addition to being wary of customer to customer transactions that can result in fraud, it is also important to consider whether or not the gift card or certificate will be good at a certain location. In some cases, a gift card will only work at a specific location, or have restrictions related to online purchases. This can be an issue with some franchise businesses. Make sure that the gift card can be used at any location nationwide before completing the purchase.
Going Out of Business
Another issue to be aware of when purchasing gift cards is that the retailer may go out of business — and the card becomes useless. For many big chain cards, and for gift cards with the logo of a major credit card company, this is not such a problem. However, if you get a gift card to a small local store, or to a store that could be in financial trouble, the gift card could become void before the recipient can use it. Be sure to consider where the card comes from before you purchase it, and ensure that it is not from a business on the verge of folding.
Giving gift cards can be a great way to simplify your Christmas shopping, but you need to do what you can to ensure that it doesn’t complicate things for the recipient.
This is a guest post Miranda Marquit is a journalistically trained freelance writer and professional blogger working from home. She is a contributor for Mainstreet.com, Personal Dividends and several other sites. Miranda is not affiliated or endorsed by LPL Financial. The opinions voiced in this material are for general information and are not intended to provide specific advice and/or recommendations for any individual.
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