Whether it’s for a holiday, birthday, or just to say thank you, picking out a gift can sometimes feel like more stress than it’s worth. Is it going to fit? Are they going to like it? Is it appropriate for the situation? More and more, Americans are turning to the option that takes the guesswork out of gift-giving: gift cards. They can be purchased from almost any retailer, they allow the recipient to pick out something they’ll definitely like, and perhaps best of all, they’re convenient to access (think the never-ending gift card racks at the grocery store). They’re also great for the recipient, as they are sure to use the gift card on their own time, on their own terms and for something they know they’ll enjoy.
As well-liked as gift cards are, though, they can also present some problems. These include unexpected fees, expiration dates, depreciation and more. Regulation used to be much more spotty, with gift card rules left up to the states, but the Credit Card Accountability, Responsibility and Disclosure Act of 2009 tightened restrictions on expirations, fees and depreciations. While this act helped, it definitely didn’t fix everything, and there are still some things gift card users and buyers need to be aware of.
A 2014 study by CEB TowerGroup reported that $750 million in gift cards would go unredeemed that year. Though that was down from $1 billion in 2013, it’s an awful lot of money spent on goods and services that are ultimately not being fulfilled. Percentage-wise, though, gift cards are being used more than ever. According to that same 2014 study, only 1 percent of gift cards were going unredeemed, in contrast with 10 percent in 2007.
Gift card spending, according to the National Retail Federation, was expected to reach $31.7 billion in 2014. That same study revealed that the average gift card buyer was planning on spending about $172 in 2014 as opposed to about $163 the year before. The study also reported gift cards have been the most requested gift item eight years in a row, and that gift card spending has increased by a whopping 83 percent since 2003.
There are two major types of gift cards. Retailer-issued gift cards, the kinds that are specific to one store or a parent company with a few different brands, are generally pretty loosely regimented. They often have no expiration date and don’t depreciate at all, though they sometimes start depreciating after a few years. They’re not likely to have any fees or any kind of charge to buy them, because the point of the cards is to get people to shop with that brand again. One of the great things about them is how widely available they are. Consumers can buy gift cards to restaurants, clothing stores, airlines, hotels, online marketplaces, other retail stores and more.
The other type of gift cards are bank-issued. They’re the generic kind that are good everywhere and branded with Visa, MasterCard, etc. With these, as opposed to the retailer-issued cards, the point is to make money, which means there is usually an activation fee. These fees can range from $2 to $10, and they depend on the issuer and the value of the card. Terms and conditions vary by the card, even among cards issued by the same company. Of course, the great thing about these cards is that they can be used anywhere that type of card is accepted. For instance, if the gift card has a Visa logo, it can run as a credit card at any location that accepts Visa.
There are a few things to consider when buying or using gift cards. First of all, gift cards simply aren’t as regulated as debit and credit cards. For instance, even with the changes brought about by the 2009 law, there can still be fees assessed and depreciation on gift cards eventually, though they are not allowed within the first year of the card being activated. Also, there’s always the concern that if the company that issued the card goes out of business, you’re kind of out of luck. This isn’t as likely, of course, with well-established companies, but there is always the possibility.
The bottom line is that you have to read the fine print. Some companies have gift cards that never expire, never depreciate and never have any fees associated with them. When this is the case, it will probably be stated right on the back of the card. Lots of cards, though, do have other fees or depreciation associated with them, and this is something you can often only find by looking at the fine print. Where do you find the fine print? By looking at the issuing company’s website. They’ll likely have an FAQ that can tell you almost everything you need to know, but the best way to ensure you know everything you can about the card is to read the terms and conditions on the site.
Even when gift card rules seem to be in your favor or at least not majorly problematic, there is often a clause built into the terms and conditions ensuring that the company can change the rules of the card anytime, often with little or no notice. Your best bet is to go ahead and use the entire balance of the card within the first year or so of receiving it.
