Credit-Card Company Gift Cards

Gift cards from Visa, MasterCard, Discover and American Express

Network-branded gift cards have the logo of one of the four major card payment networks on them (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 who 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 that 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 $4 to $8 plus the value you want to put on the card.

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 with the same credit-card logo. However, legislation for gift cards varies greatly from state to state, and sometimes state laws limit fees. According to the National Conference of State Legislatures, Connecticut 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, Montana and New Mexico do not allow fees or expiration dates either, 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.

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 Bank of America Visa Gift Card (*est. $5.50), on the other hand, charges a $15 fee to replace a lost or stolen card. There are no maintenance fees, but you only have nine months to use the card before it expires.

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.

Typical fees for bank-issued gift cards are 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.

Despite the fees and terms, consumers don't seem to be deterred by bank-issued gift cards. According to Bankrate.com, the industry grew by 121 percent in 2006, and research suggests that it will continue to grow. Dan Horne, a marketing professor at Providence College, says that "consumers vote with their wallets. If they view it as worth the $5 extra, then they do it. There are alternative products, but consumers are saying, 'I don't mind paying the fees because I think the value I'm getting is fair.' " Still, some network-branded gift cards have better terms than others.

American Express, for instance, offers specialty gift cards (*est. $5) that are bundled with savings from select merchants. Classic gift cards (*est. $4) cost slightly less but 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. Expiration dates vary depending on where the card is purchased, but remaining balances can be transferred to a new card at no cost. A maintenance fee, however, of $2 per month is assessed beginning 12 months from the date of purchase. The American Express gift card is not available to residents of CT, HI, NH, RI or VT.

The Discover Gift Card, though also not available in all states, has some of the best terms available on an open-loop gift card. Discover offers three options: the regular gift card (*est. $4), the eGift card (*est. $4), and the gift card package (*est. $7), which includes a matching greeting card. Shipping for all three is free. Cards purchased from Discover expire 24 months from the time of purchase. Once a card expires, the balance can be transferred to a new card for a $5 fee. Monthly maintenance fees of $2.50 are not charged until after 12 consecutive months of non-use, so 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 eGift 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.