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

Hang up on paid fundraisers for police and firefighters

You’re having dinner one evening when someone calls to say that your local police officers or firefighters need your financial help. Who wouldn’t want to give to such a worthy cause?

Possibly you. Most of the telephone and direct-mail fundraising done on behalf of police and fire organizations is conducted not by the organizations themselves but by paid solicitors, who often take 70 cents or more of every dollar they raise. For example, in a recent study, Connecticut’s Public Charities Unit determined that the state’s public-safety groups in 2005 received less than 33 cents of every dollar raised on their behalf. In some cases, the percentage that went to the organization was in the teens.

And the paltry amounts are only part of the story. Just because the word police or firefighter is in an organization’s name doesn’t mean there are police officers or firefighters in the group, the Federal Trade Commission warns. Also, the money that goes to the group might not be used locally or for any public-safety purpose. Finally, donations are not always tax-deductible.

If you receive such a solicitation from a public-safety group, just hang up. If you’re interested in giving to an organization, contact it directly and find out how the money will be used and whether the donation is deductible. Then if you send a check, you’ll be sure the group will get the entire amount instead of a tiny percentage.

Before giving to any group, it’s a good idea to check it out to make sure it’s a legitimate charitable organization and that your donation will be tax deductible. You also might want to dig further to see if the group spends the money you donate on good works and not on overhead and fundraising expenses. Click here for more on how to check out a charity.—Anthony Giorgianni

Year-end investment moves can trim your taxes

Whether you’re a risk-taking day trader or a buy-and-hold traditionalist, making some savvy moves with your investment portfolio before the year is over can cut your 2007 tax bill. Here are some strategies to consider:

• Take losses. If you own stocks, bonds, or mutual funds that are underwater, consider selling them before Dec. 31. You’ll generate capital losses that can be used to offset any capital gains you realized in 2007. If you accumulate more net losses than gains, you can deduct up to $3,000 of them from your ordinary income each year. If you’re in the 28 percent bracket, a $3,000 loss will trim your Federal tax bill by $840. Excess net losses can be carried forward indefinitely to offset capital gains or ordinary income in future years. Note that the gains you can offset aren’t limited to profits you’ve made by selling securities. Long-term capital-gains distributions from mutual funds can also count.
• Reinvest with care. When taking capital losses, be aware of the “wash sale” rules, which might invalidate your loss if you replace your holdings within 30 days of the sale. Say you take a loss on a real-estate fund you bought at the sector’s peak. If you think the fund will rebound and you buy it back within 30 days, your loss won’t count. But you can buy it back after 31 days or invest in a different real-estate fund at any time. As long as the funds are not substantially identical, you won’t have a wash sale, but you’ll stay invested in that sector.
• Mind your mutual-fund trades. If you’re going to buy fund shares in December, wait until after the fund makes its capital-gains distribution for the year. If you buy before the distribution date, you’ll simply get some of your own money back as a distribution—and you’ll owe tax on that return of your own capital. If you’re selling a fund for a long-term gain in December, do so before its ex-dividend date, the day on which the capital-gains distribution is deducted from the fund’s net-asset value per share. If you wait, some of the distribution you receive may be a short-term capital gain, taxed at higher rates. By selling before, most or all of your profit will be a favorably taxed long-term capital gain.—Donald Jay Korn

Use credit and debit cards wisely this holiday season

Have you started your holiday shopping yet? If you haven’t, you’re not alone. According to a recent Consumer Reports Holiday Shopping Poll, only 22 percent of consumers anticipate finishing holiday shopping right after Thanksgiving, compared to 30 percent in 2006. Forty-five percent of respondents said they do not anticipate finishing their shopping until the second week of December, and 20 percent said they would be pushing it right to December 24th. And approximately 6 percent of respondents are resigned not to complete their shopping until after the holidays.

Nearly one-quarter (23 percent) of our survey’s respondents said they expect to spend less this year than in 2006. If you want to control your spending, consider making a budget before you begin to shop. In our survey, among the 33 percent of consumers who made a budget for last year, 43 percent managed to stay on budget, with only 8 percent going way over budget.

Don't let finance charges and other fees push you over your budget. To keep from spending more than you have to, use the payment method that makes the most sense for you. If you pay off your credit card balance in full each month, charging your holiday gifts won’t cost you anything in finance costs and may even provide a bonus in the form of a cash-back or other type of reward. If you’d rather spend only what you have on hand but don’t wish to carry large amounts of cash, use a debit card. But be aware that if your bank account balance is inadequate to cover your purchase, you can be hit with large overdraft fees. Click here for more on how to decide the best method of payment.

Credit cards ranked for safety

Looking for a safe credit card? Bank of America’s Visa Platinum Card was rated tops in a recent study by Javelin Strategy & Research in California. The rating is based on the bank’s card-security services and technology, as well as its practices for secure handling of consumer information. The second-highest was American Express Blue, followed by Discover Platinum, First National Bank of Omaha’s Platinum Visa, Citi Platinum Select, and Navy Federal Credit Union’s Platinum MasterCard.

The Javelin study also found that some issuers lack security safeguards. Only 24 percent let cardholders either place limits on cash advances or not allow them altogether. And 56 percent require cardholders to provide their full Social Security number to interact with the company by phone, the Web, or mail.

For our advice on choosing and using credit cards wisely, click here. —Anthony Giorgianni

Protect yourself from post-wildfire financial scams

As if the catastrophe of the recent southern California wildfires was not bad enough, scam artists are reportedly using the disaster to prey on victims and good Samaritans alike.

The IRS warns taxpayers to avoid a fraudulent e-mail soliciting charitable contributions to aid fire victims that appears to be from the IRS and the U.S. government. The scam leads readers to a phony Web site with a donation form requesting the recipient’s personal information.

The IRS says the site is another example of phishing, in which recipients are tricked into providing personal and financial information that can be used to steal their assets. For tactics on protecting yourself from phishing, click here.

Other post-disaster threats

After a disaster, you may receive a phone solicitation from an organization purporting to be collecting for disaster relief. The Identity Theft Resource Center, a San Diego-based not-for-profit organization, recommends you hang up on such calls and initiate the call yourself to your charity of choice. Most legitimate relief agencies are too busy administering to disaster victims to solicit donations, the ITRC notes.

If you have been dealing with a business affected by the fires, call as soon as you know they’re back in business to confirm that your identifying data—financial records, social security number, etc.—have not been compromised, which could lead to identity theft. If you’re told otherwise, visit the ITRC’s Web site for guidance on what to do. And click here for our article on preventing identity theft. —Tobie Stanger