By Christine Frietchen on October 5, 2009 in
This week, The New York Times and other outlets reported that American Express would drop monthly fees associated with its gift cards effective immediately. Until now, and as we reported in our analysis of gift cards, a $2 monthly fee kicked in if you had not used your gift card within 12 months. It's pretty easy to see how the fee would quickly whittle away the value of your card. The fee drop applies to all American Express gift cards -- even ones you already own.
It's expected that the AMEX change will spur other gift-card issuers to follow suit. Fees have long been the downside of bank-issued gift cards. On the other hand, store-issued cards (such as those from Gap or Home Depot) typically have no fees at all, plus no expiration dates.
The American Express announcement comes on the heels of changes made to credit-card laws back in May when the Credit Card Accountability, Responsibility and Disclosure Act was signed into law. The gift-card portion of the Act goes into effect in August 2010; it prohibits gift cards from expiring for five years and restricts card issuers from charging fees on gift cards unless the card has not been used for 12 months.
American Express representatives say that the legislation didn't effect their decision to drop fees (in fact, the company would have already been in compliance with the new laws because fees weren't applied for the first 12 months anyway). Still, these fees are the big "gotcha" to keep in mind when buying gift cards. In general, here are some tips to keep in mind before you buy a gift card (a complete list of tips can be found in our gift card report).
- A store-issued gift card is usually a better deal over a bank-issued card. Gift cards from retail stores usually come with far fewer strings attached than bank-issued gift cards.
- Read the fine print. Terms and conditions, including various fees and expiration dates, are often printed on the card or the packaging but sometimes are included in an accompanying pamphlet. Most companies also list them on their website.
- If you buy a bank-issued gift card, double-check fees and expiration policies. Choose one with low fees and an expiration date of at least 12 months from the purchase date.
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