Gift cards are expected to be more popular than ever this holiday season, with 80 percent of shoppers planning to buy one, a National Retail Federation survey found.
But not all gift cards are created equal, warns Bankrate.com credit card analyst Janna Herron.
General-purpose cards issued by American Express, Visa, Discover and MasterCard all carry a purchase fee that you might not notice in the holiday rush. These cards have the logo of a payment card network and can be used wherever that network is accepted.
“While really convenient for the person who you are giving it to, you will have to pay a purchase fee upfront of $3.95 to $6.95,” Herron said. “It is a little eye-opening. If you get cards for four people, the fees could be 20 bucks right there.”
That’s not true of most brand-specific cards for a particular retailer such as a department store, specialty store, restaurant, gas station or airline. Few of those have purchase fees.
Bankrate’s research into 62 different gift cards, turned up just three specific cards that carried a purchase fee: Staples, Toys “R” Us and Chevron/Texaco.
“The other thing we found is that none of the brand-specific cards expire, and they do not charge an inactivity fee,” Herron said.
Federal law requires that money on a gift card cannot expire for at least five years.
Florida statute 501.95 http://www.flsenate.gov/Laws/Statutes/2012/501.95 states gift cards may not have expiration dates or dormancy fees, maintenance fees, etc. However, Florida law exempts cards issued by a financial institution from the stricter requirements. So that means the MasterCard, Visa and similar cards can charge maintenance fees and can also expire after five years.
The stricter requirements apply only to cards issued by specific retailers.
Of the seven general purpose cards Bankrate surveyed, 71 percent charge dormancy or maintenance fees to the recipient.
In another interesting twist, the survey found that people over 65 and those between 18 and 29 are the least likely to give a gift card.
Herron theorizes that the younger people are still in college or in entry-level jobs and do not have much disposable income. Older folks, some of whom are retired or on fixed incomes, are more likely to be old-fashioned and prefer to give cash and checks or gifts rather than a gift card.
People like giving gift cards because it’s quick and easy, and there are no worries about size or color. With a restaurant or spa gift card, it’s also about giving someone an experience.
Another plus with gift cards is that there is protection against theft or a lost card. Keep your receipt so the purchase can be verified. Some issuers will not replace such cards, while others will, but charge a fee to do so. You can find a company’s policy on its website. It also helps to register the card on the company’s website.
Of course, many retailers such as Target offer the option of purchasing a plastic gift card, an e-gift card that is sent to the recipient’s inbox, or in some cases, even to his or her smart phone.
A number of restaurants such as Outback Steakhouse, Brio Tuscan Grille, Bonefish Grill offer incentives this time of year such as a $20 gift card for every $100 in gift card purchases. Keep in mind that those bonus cards do have expiration dates, which is allowed since they are part of a special promotion. Some expire as early as February.
Whatever you do, put the gift card in your wallet so you won’t forget to use it. Americans have billions of dollars of unused gift cards forgotten in junk drawers or elsewhere. Some estimates have placed the unused cards as high as $300 per household.
The Federal Trade Commission advises buying gift cards from known and trusted sources. Avoid online auction sites, because the cards sold there may be counterfeit or may have been obtained fraudulently.
Here are additional findings from the Bankrate survey of 1,001 adults conducted by Princeton Survey Research Associates:
•Almost two in three Americans have given a gift card, and more than three in four have received one.
• The most common value of gift cards is between $25 and $50.
• As income level increases, Americans are more likely to give and receive gift cards.
• 53 percent of the gift cards that Bankrate.com surveyed can be reloaded, up slightly from 51 percent last year.
• 56 percent can be delivered electronically, in line with each of the past two years.
• 69 percent of gift card issuers will replace the card and/or funds in the event of loss or theft.