Gift cards can be an alternative when you don't want to give cash, and most people say they enjoy receiving them. But there are some tips to keep in mind when choosing a gift card or redeeming one. Most consumers don't realize that many bank-issued gift cards are charged monthly maintenance or dormancy fees after a period of nonuse, which can eat up the balance of the card. In addition, some gift cards have expiration dates. However, store-issued cards generally have no such fees or expiration dates.

The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, which will go into effect August 2010, prohibits gift-card issuers from attaching expiration dates to gift cards unless the date is five years or longer after the card has been issued, and does not allow maintenance or dormancy fees to be charged unless the card has been inactive for 12 months or longer. Experts advise carefully checking the terms and conditions of a gift card before making a purchase.


Buying a gift card

Reviewers say the following about buying a gift card:

  • 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 no or low fees and an expiration date of at least 12 months from the purchase date.
  • New laws will offer better protection. Laws regarding gift cards vary greatly from state to state. Many states do not allow gift card issuers to charge any fees, but this mostly applies to retailer-issued cards. Only a couple of states restrict fees on bank-issued cards. However, new legislation will go into effect in August 2010 that will apply to all gift cards, although state laws that are more stringent will take precedence. Under the Credit CARD Act of 2009, gift cards may not expire until at least five years after the date they are issued and monthly maintenance or dormancy fees are not permitted unless the card has been inactive for at least 12 months.
  • Purchase from reputable sources. Fraudulent sellers can lurk at online auction sites or classified-ad sites, selling cards that are either invalid or obtained fraudulently.
  • Make sure the PIN has not been tampered with. It should be covered with a plastic scratch-off coating.
  • Keep your receipt and give it to the recipient along with any terms and conditions that come with the card. Most companies require an original receipt in order to replace a lost or stolen card.

Using a gift card

If you receive a gift card, make sure you actually use it. About 25 percent of gift cards are unused a year after they're purchased -- that's wasted money. If you've received a gift card, here are some tips on getting the most out of it.

  • Register your card. Several companies will not replace a lost or stolen card unless it was registered first. This can usually be done at the issuer's website. You can also note the card number and PIN and keep it in a separate location. You'll need it to replace a lost or stolen card.
  • Use it soon. Some cards come with expiration dates and/or maintenance fees that can whittle away your balance. If a retailer goes out of business or files for bankruptcy, unused gift cards often become unredeemable.
  • If you don't plan to use the card soon, create a reminder in your calendar. If you don't plan to use it within a few weeks, make a note in your calendar four or six months out as a reminder.
  • If you can't find anything in the store that you want, check online. Many store gift cards can also be used online where there are no lines and the selection is better. For example, Wal-Mart gift cards can be used online as well as stores. Gap GiftCards can also be used online and at sister stores (Banana Republic, Old Navy, etc.). Bass Pro Shop, Cabela's and Bed Bath and Beyond gift cards can all also be used online. Pottery Barn gift cards can also be used at Williams-Sonoma and West Elm at stores or online.
  • Keep bank-issued cards even after the balance is depleted. Refunds are generally credited to the purchasing card, so it is important to hold onto the card until you are certain that you will not need to make any returns.
  • Don't use a bank-issued gift card for hotel stays, at gas stations or for car rentals. These types of retailers can place a hold on your card above and beyond the amount of your purchase. These additional funds won't be available for your use until the original charge clears, which can be seven to 14 days from the purchase date.
  • Make complaints when there is a problem. Contact the issuer first. If the problem cannot be resolved with the issuer, contact the appropriate authorities, namely the Federal Trade Commission for retail cards at (877) FTC-HELP (877-382-4357) or online. Contact the Comptroller of the Currency's Customer Assistance Group at (800) 613-6743 or by email for bank-issued cards.

If you can't use a gift card

  • Trade your card. Some sites let you swap cards with others, typically for a listing fee of $2. Also, try listing your card for free on Craigslist or listing it on eBay.
  • Sell your card. You lose value, but if you really want the cash, there are websites that will buy your gift card for 60 to 80 percent of its value, depending on the store. GiftCardBuyBack.com and SwapAGift.com, for example, allow registered members to trade in unwanted cards for a reduced value.
  • Donate your card. Charities, including the Make-A-Wish Foundation, are happy to accept unused gift cards as donations. Schools and churches can use gift cards for raffles and fundraisers.
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