Consumer agency offers guidance on gift cards

When buying gift cards for the holidays, you might want to stick to retailer-issued cards, which remain relatively free of the expiration dates and pesky fees common to the bank-issued variety. In its fifth annual gift card survey, the Montgomery County, Md. Office of Consumer Affairs recommended 18 of the 22 retailer gift cards it reviewed from late October to November.

But the agency said all of the 30 bank-issued cards it examined continue to have purchase and processing fees, expiration dates and other gotchas, some of which were not properly detailed despite disclosure-related lawsuits brought by the Federal Trade Commission and 2006 guidance issued by the federal Office of the Comptroller of the Currency.

The report’s criticism of gift cards, particularly those issued by banks, mirrors many of the problems Consumer Reports Money Adviser identified in its recent gift card report, published earlier this month. Bank-issued cards bear a major credit logo and, unlike retailer cards, can be used at most merchants that accept that brand of credit card.

RETAIL STANDOUTS
The Montgomery County report recommended 18 standout retail gift cards because they lack fees and expiration dates; are replaceable if lost or stolen; can be used to make purchases from the retailers’ Web site in addition to its walk-in stores; and have a scratch-off personal identification number, a security feature that may help prevent unauthorized purchases. The 18 cards are issued by Abercrombie & Fitch, Best Buy, Blockbuster, Circuit City, Crate & Barrel, Gap, JCPenney, KB Toys, Kohl’s, Lowe’s, Nordstrom, Old Navy, Pet Smart, Sears, Sports Authority, Starbucks, Target, and Wal-Mart.

The four retail cards that weren’t recommended are the Macy’s and Bloomingdale’s cards, which expire two years after the cardholder last adds value; the Shell gas card, which imposes a $1.75 a month “dormancy” period after 12 months of non-use; and the card from Claire’s fashion accessories store. The Claire’s gift card’s $1 per month dormancy fee, which kicks in after two years of inactivity, is applied retroactively to the first month. The fee is not disclosed when the Claire's card is ordered on the retailer’s Web site, the survey reported.

FEES AND EXPIRATION DATES
The survey found many of the same fees and other limitations that have typified bank-issued cards for years:

• Purchase and processing fees. These ranged from $2 to $10.90.
• Maintenance fees.  Monthly maintenance fees ranged from $1.25 to $4.95, kicking in after six months to a year, depending on the card. The iCARD Visa Gift card imposes a $25 fee after the first six months and every six months thereafter.
• Expiration dates. These were from 6 months to 42 months. After the expiration date, card holders usually can get the card reissued or request a refund, though nearly all of the cards impose a charge, ranging from $5 to $25, for doing so. Moreover, many of the cards continue to charge monthly maintenance fees even during periods when the card is expired.
• Replacement fee. These ranged from $5 to $15.

MISSING DISCLOSURES.
The survey identified seven bank cards that failed to properly inform purchasers about fees and other restrictions. For example, the Vanilla Visa Gift Card packaging says nothing about its maintenance fee. And the AAA and iCard Visa Gift Cards have no maintenance fee disclosure on the cards themselves, flying in the face of the OCC guidance. Both the U.S. Bank Visa Gift card and the giftcertificates.com MasterCard Gift Card Web sites say their cards expire, but neither reveals how long the card holder has before that happens.—Anthony Giorgianni

Comments

[Rachelle Williams]

This was very valuable information. One year I brought several people American Express gift cards and several of them did not even work when they went to make purchases. Thank you very much!

[D. Sears]

There are a host of ways retailers and banks use these cards to retain some of the money via fees and other mechanisms. I discovered one such means with a card issued by a fast food chain. I have used the card a few times and had $3.45 left on the card. I placed an order that cost just over $5 but could not use the card because it would not cover the whole amount. I was informed I could not pay for part by card and part by cash.

Consumers Reports doing an extensive article on these cards, and exposing many of the means firms use would be a valuable service to the public. I encourage CR to shine their light upon this issue.

[Rob Richard]

For those folks who don't use their cards, or would prefer cards perhaps from a different retailer, there are websites such as swapagift.com where you can trade your unused cards for other cards, offer to sell it to other site users, or sell it to the site themself. Of course there are charitable organizations that may take them as well, for a tax right off.

[Jason DeLozier]

I purchased a Vanilla Visa $25.00 gift card 6 weeks ago and have been unable to use it a single time since then. I even had a replacement card sent and still have no access to my money. I know that is is only $25.00 but it's the principle of this that really gets to me. I think that I should be able to sue but I have no clue on how to proceed or how much to sue for. Does anyone have any suggestions for me?

jasondelozier@aol.com