Prior to the CARD Act, retailers who sold gift cards could earn big profits from consumers who failed to use the gift cards quickly. They would simply state that the card expired after a set number of months, or almost immediately begin deducting a monthly fee for every month the card was not used – until the balance was entirely used up.
Now, under the CARD Act, gift certificates, store gift cards and general-use prepaid cards which are usable at multiple merchants and branded by Visa or MasterCard, will be prevented from this practice.
As of August 22, when this part of the CARD Act kicks in, cards can’t begin to lose value for non-use until they have been dormant for 12 months.
However, you don’t need to worry about the gift card issuers profit margins. They have found a variety of other ways to make sure selling gift cards remains profitable.
Experts say there are as many as 50 different fees that card issues can impose – all of which effectively reduce the spending power of those gift cards.
For instance, the issuer may charge a fee for issuing the gift card – which is what I found when I wanted to use the Internet to electronically send a Wal Mart gift card to an out of state family. The same card purchased in the store, however, carried no fee. So rather than pay $5 or so to have it electronically delivered, I paid for an envelope and a postage stamp to mail it.
Fees can also apply to making a transaction, checking the balance, or calling customer service. And if you need a replacement card, you’re sure to pay a fee.
Gift card issuers aren’t exactly happy with the CARD Act’s provision that gift cards cannot expire for 5 years after issuance, or since last loaded with money. In the past, they have expired after one or two years.
Aside from the ability to make these gifts disappear, another reason that gift card issuers don’t like the new rules is that keeping track of the gift cards issued and their potential for use is an added burden to bookkeeping departments.
In keeping with the general confusion and loopholes inherent in new government regulations, not all gift certificates and cards are subject to the new regulations. Paper gift certificates, reloadable prepaid Mastercard® or Visa® credit cards, and telephone cards are exempt from the restrictions.
Loyalty, award or promotional gift cards are also exempt, so if you’ve received such a card – use it quickly before it dissolves.
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