Expiration dates used to be a big problem. Not anymore. Federal rules now require all gift cards to be good for at least five years from the date of purchase. Some states, including California, Connecticut, Florida, Minnesota and Washington, prohibit the sale of retail gift cards that expire. (See a list of state gift card laws.)
Fees are now the big “gotcha,” especially for gift cards issued by banks and credit card companies.
For its just-released 2012 Gift Card Survey, Bankrate.com surveyed 55 popular store gift cards and eight general-purpose gift cards. All of the cards issued by the banks and credit card companies charged a purchase fee — ranging from $2.95 to $6.95 — while only 9 percent of the store-branded cards did.
“To get the most value you want to go with a store-branded gift card as opposed to a general-purpose gift card that has the Visa, MasterCard or American Express logo on them,” said Janna Herron, a credit card analyst at Bankrate. “The benefit of these general-purpose cards is that you can use them anywhere, but because of the fees, you’d be better off giving cash.”
One more thing to watch out for: dormancy fees. Federal rules allow an inactivity fee to be charged after 12 months. Only 2 percent of the store gift cards in the Bankrate survey have a dormancy or maintenance fee. Seventy-five percent of the general-purpose cards do. They charge as much as $3 a month — if the card is not used for 12 months or more.
What if the card is lost or stolen?
“The biggest risk you have with a gift card is that you lose them or don’t use them,” said Gerri Detweiler, personal finance expert at credit.com. “Always register the card, because if it’s lost, it’s like you lost cash.”
Remember: A gift card, even one with a bank or credit card logo on it, is not a credit card. Each issuer decides what to do if the card is lost or stolen. Bankrate found that about two-thirds of the cards offer loss/theft protection.
Consumer Reports advises giving the purchase receipt along with the gift card because that proof-of-purchase may be required if the card disappears.
Spend less, get more
There’s no reason to pay full price for a gift card. Costco sells a variety of restaurant gift cards for 20 percent off the face value.
You can also find deals at websites that buy and resell gift cards, such as Gift Card Granny, Card Hub, Cardpool, CardCash, or Gift Card Castle. These cards are for well-known retailers, from Ann Taylor to Zappos.com.
“The average discount is about 10 to 15 percent, but they can go up to 35 percent depending on the merchant,” said Elliott Klier, founder of CardCash.com.
Using one of these established sites is much safer than buying from an auction site or Craigslist. They guarantee the card is loaded with the value listed. And there’s no shipping charge.
Savvy shoppers visit these sites to buy discounted gift cards to use themselves. It’s a simple way to stretch that holiday shopping budget. Basically, you’re buying cash at a discount. Gift cards can be combined with coupons or special offers. They can also be used on Black Friday.
If you get a gift card you don’t want, you can use these same sites to turn that card into cash. They normally pay about 90 cents on a dollar.”