Giving Gift Cards? Read This First

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What do you give to the person who has everything? The simple answer: a gift card. Popular as stocking stuffers, office gift-swaps, and full-blown presents to family members, these cash-loaded pieces of plastic also suffice when recipient choice is a prime goal or as last-minute offerings that show a tad more thought and effort than handing over cash. But be forewarned. Gift cards usually come with fees attached, an industry practice that might set you wondering whether the old-fashioned envelope stuffed with green wouldn't be preferable.

Gift Card Fees.

There are no freebies with gift cards, whether buying one or using one. Perhaps the most irksome is the charge assessed for purchasing a generic Visa, MasterCard, Amex, or Discover gift card and some store-specific cards, such as Target. Called an activation, purchase, or processing fee, the amount varies by issuer and sometimes by the cash value put on the card, but generally falls between $2 and $7. Some card issuers also charge to personalize a gift card with a unique picture or message, which seems more justified given the request for an extra service.

Other fees often associated with gift cards include:

  • Inactivity Fee:

    Runs about $3 per month and typically kicks in after 12 months of inactivity.
  • Replacement Card:

    For a fee of $7.50 to $15, you may be able to replace a lost or stolen gift card if it was registered beforehand.
  • Shipping:

    Purchasing a gift card online may obligate you to a shipping fee.

Bankrate has posted a user-friendly tool that details basic fees and limits for 62 gift cards.

Are Fees Legal?

Several federal and state laws govern what gift card issuers can and cannot do. Passage of the Credit Card Accountability Responsibility and Disclosure (CARD) Act in 2009 set a minimum five-year expiration on gift cards, but you may need to request a replacement card to carry the unused funds after that. Also, issuers cannot charge inactivity fees unless the card is dormant for at least a year and then may only charge an inactivity fee maximally once per month. Individual states often add more consumer protections; many of the provisions are fairly complicated. A list of state laws compiled by the National Conference of State Legislatures is a useful reference.

Avoid Common Fees.

If you plan to buy a gift card this holiday season (or at any time), first check the fine print for fees. Sometimes they're easy to avoid. For example, you won't be socked with shipping fees if you buy the gift card in a store or purchase an e-gift card that can be printed at home and placed inside a holiday card. Moreover, the initial purchase fee is often waived for company-specific gift cards; Kmart, Best Buy, Whole Foods, and AMC Theatres are several examples.

Getting More Than You Paid For.

Another method for avoiding fees and getting more value for your money is to buy "used" gift cards. Several websites buy unwanted gift cards (never used or with a remaining balance) at a discount and resell them at a slightly smaller discount. For example, Cardpool will buy a $100 American Eagle gift card for $68 and sell it for $82, without any loss to its face value. This site also doesn't charge shipping or activation fees. Gift Card Granny aggregates gift card sales so that you can search for the best deal at once.

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