Credit-Card Company Gift Cards

Gift cards from Visa, MasterCard, Discover and American Express

Network-branded gift cards carry the logo of one of the four major card-payment services (Visa, MasterCard, American Express or Discover). According to CreditCards.com, Visa and MasterCard don't issue their own gift cards. They just process transactions for the financial institution that has issued the card. It is the financial institution, not Visa or MasterCard, who sets the card's fees.

Network-branded gift cards can be purchased from banks, credit-card companies and some retailers, such as Wal-Mart. Some experts say they are a classier way to give a cash gift because they can be used anywhere that credit cards are accepted, but they do cost more than cash and have other disadvantages as well. And while retailer gift cards are free to buy (you pay for the value of the card only), bank-issued cards usually cost $3 to $8, plus the value you want to put on the card.

Many bank-issued gift cards come with a long list of terms and conditions, namely fees and expiration dates. Those terms and fees vary greatly from one card issuer to the next, even among cards that carry the same credit-card logo. New laws that go into effect in August 2010 will eliminate some of the fees and conditions that make these cards inconvenient, but not all. The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 mandates that cards not expire for at least five years. In addition, dormancy fees will not be permitted unless the card has been inactive for 12 months or more. Upfront fees for purchasing the cards will still be permitted, although the Federal Reserve has been asked to review these charges to deem whether or not they are appropriate.

Laws governing gift cards varies greatly from state to state and sometimes limit fees. After the Credit CARD Act of 2009 goes into effect in August 2010, any state laws that are more stringent will still apply. According to the National Conference of State Legislatures, Connecticut, Montana and Rhode Island provide the best protection for consumers by not allowing expiration dates or fees of any kind for any gift card. Florida, Minnesota and Montana do not allow fees or expiration dates, but exclude bank-issued gift cards from legislation. Both Hawaii and New Hampshire also do a good job of protecting consumers by not allowing fees of any kind and by severely limiting expiration dates. Most states, however, only require full disclosure of terms or allow expiration dates or fees after two years, but exclude bank-issued cards from these rules. The upshot: Read the fine print carefully to know what you're buying.

Fees and conditions vary widely for bank-issued gift cards. For example, the HSBC MasterCard Gift Card (*Est. $5 to $7) charges $5.95 to replace lost or stolen cards. The HSBC gift card expires in 24 months, but after 12 months, a monthly charge of $2.50 is deducted. The U.S. Bank Visa Gift Card (*Est. $4 to $7), on the other hand, charges a $15 fee to replace a lost or stolen card and also carries a monthly maintenance fee of $2.50 after the first 12 months. Account balance information is available online for free, but only the first two calls to the automated telephone number are free. After that, a 50 cent charge applies to each call.

The Gift2Go Visa Gift Card (*Est. $4 to $6) from Marshall Bank is another bank-issued card. It expires 24 months from the purchase date. At that time the remaining balance can be transferred to a new card for a $5 fee, if requested within 60 days. A monthly maintenance fee of $2.50 is charged after 12 months, regardless of usage. Lost or stolen cards may be replaced for a $5 fee.

Typical charges for bank-issued gift cards include purchase fees, maintenance fees, replacement fees and cancellation fees. Some issuers even charge transaction and inquiry fees. Most cards expire six months to three years from the date of purchase, but many issuers will transfer the remaining balance to a new card for a fee. Some will send the balance in the form of a check, also for a fee.

Reviewers warn that customers may experience problems using bank-issued gift cards when the purchase price is greater than the balance of their card. Many retailers allow split-tender transactions, where the purchase is paid for with more than one form of currency, but some do not. Experts suggest that customers keep track of their remaining balance to make these types of transactions easier. Gift cards are not intended for certain types of purchases, according to an American Express spokesperson interviewed by Dennis Rockstroh for the San Jose Mercury News. Hotels, gas stations and car rental companies can place a hold on a credit, debit or gift card above and beyond the amount of the purchase. These holds typically last for seven to 14 days and can tie up the rest of the balance of the card during that time. She advises using gift cards inside gas stations instead of swiping them at the pump to avoid hold charges.

Most experts agree that American Express is currently the best option among open-loop gift cards, due to its decision to eliminate monthly fees and expiration dates. There is still an upfront fee to purchase the card, but lost or stolen gift cards are replaced for free, and American Express offers additional benefits with some specialty gift cards (*Est. $4) that are bundled with savings from select merchants. The American Express Especially for Dining Gift Card, for example, entitles the cardholder to receive discounts at participating restaurants, such as The Palms, Papa John's and Big City Diner. Classic gift cards (*Est. $4), on the other hand, do not offer any discount or coupon offers. The company offers nine different cards for various occasions and personalities in denominations ranging from $25 to $500. The American Express gift card is not available to residents of Hawaii or Vermont due to the states' restrictive legislation.

The Discover Gift Card also offers some favorable terms, and while the company is moving towards eliminating expiration dates, there are still inactivity fees. Discover offers three options: the regular gift card (*Est. $4), the e-gift card (*Est. $4) and the gift card package (*Est. $7), which includes a matching greeting card. Shipping for all three is free. Going forward, cards don't expire, though the card itself will include a validity date -- that's so you can make online purchases on sites that require the input of a card-expiration date. Monthly maintenance fees of $2.50 are charged after 12 consecutive months of inactivity, but as long as you use the card at least once in a 12-month period, you avoid the charge. Denominations for regular Discover gift cards range from $20 to $500, and from $20 to $250 for e-gift cards. Discover gift cards cannot be sold or shipped to residents of Colorado, Hawaii, Rhode Island, Tennessee and Vermont because of local laws regarding the use of gift cards.

Companies are required by law to disclose all terms and conditions, but these terms are not always easy to find. Some companies list them on the packaging and others include them inside. Most, however, list them on their website. Experts recommend that consumers read and compare them before making a purchase and give them to the recipient along with the card. Critics also suggest that consumers check with their own bank first because many offer better terms to their own customers.