Gift Card Reviews

Avoiding gift-card gotchas

Gift cards top wish lists around the holidays, and they are overwhelmingly the top pick of teens. Gift cards are also popular when you're not sure what to get someone, or if you're worried about choosing the wrong thing. And they aren't just favored by teens: In a recent survey by the National Retail Federation (NRF) conducted by BIGresearch, just over 55 percent of grown-ups say they hope to receive a gift card this year.

In the same NRF survey, 12.6 percent of respondents said they were worried about the fees and gotchas associated with gift cards. But there's good news on that front. While many bank-issued gift cards have fees and expiration dates, store-issued cards generally don't, and even some bank-issued cards are moving away from inactivity fees.

For example, the U.S. Bank Visa Gift Card charges a $2.50 monthly maintenance fee, beginning 12 months after the card has been issued, whether the card has been dormant or not. The GiftCards.com Visa Debit Gift Card charges a 35 cent transaction fee for every purchase and a maintenance fee of $2.50 per month, beginning six months after the issue date. On the other hand, American Express has recently dumped all fees for its gift cards (except for the fee for the initial purchase).

Both The Wall Street Journal and The New York Times discuss new regulations that will go into effect August 2010, as well as plans by retailers this holiday season to use gift cards as incentives to get customers into stores. We also found sources that discuss gift-card pitfalls, including articles by the Montgomery County (Md.) Office of Consumer Protection, BankRate.com, Consumers Union and other sources.

Fraudulent use of gift cards is also a problem. An article on FraudGuides.com describes the various ways criminals can fraudulently use or exploit gift cards, including writing down the card numbers of cards publicly displayed in retail locations and then using the number to make an online or "card not present" purchase after the card has been purchased and activated by another customer. In other cases, counterfeit cards are sold on online auction sites or customers are sent other cards that have not been activated while the seller retains and uses the loaded card. The authors advise purchasing gift cards only from reliable sources, preferably directly from the retailer for which it is intended, and staying on the lookout for signs of tampering, such as an exposed PIN on the back of the card.

An additional concern for customers is retailer bankruptcy, which is addressed in most of the recent coverage of gift cards we found. According to experts, when a store files for bankruptcy, their gift cards often become void unless the retailer makes a special arrangement with the court. For this reason, advocates say customers should only purchase gift cards from an established store, read the fine print before purchasing and use the card quickly once it has been received.

Despite all this, it's a safe bet that gift cards will not be going away anytime soon. In fact, according to ConsumerReports.org's annual holiday shopping survey, gift cards are tied with electronics for the most-wanted gift this year, and 46 percent of those surveyed intend to purchase gift cards this holiday season. While this is a decline from last year, the numbers are still strong compared to the overall retail outlook. It's not hard to see why gift cards are so popular. In an article for Idaho Statesman, Candice Choi states, "The attraction of gift cards is obvious -- they're no hassle crowd-pleasers and you can buy them at the last minute."