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Giving or receiving gift cards? Know the terms and avoid surprises

My family and I just moved into a new house. With all the packing and unpacking, my kids and I found three gift cards we had forgotten about. Mine was from my birthday, almost a year ago. Theirs were from last Christmas. So while most consumers are shopping for this year’s holiday season, we’re putting the wraps on last year by spending these long-lost gift cards.

If you have old gift cards sitting around, you might want to consider doing the same. Federal rules say that gift cards cannot charge inactivity or service charges for 12 months, but after that first year, these fees could start to eat away at your card’s value.

If you find a gift card that has an expiration date, call the phone number on the card to see if the funds are still available. Under current federal law, a gift card cannot be sold that will expire in less than five years. If funds are still available to you, a new card must be issued at no cost to you. Your state may provide additional protections and rights.

Thinking about giving a gift card to someone for the holidays?

Here’s a quick rundown of the different kinds of cards:

  • Store gift cards
    Branded by a single merchant or group of merchants, and can only be used at those stores.
  • Network branded gift cards
    These will have a logo like American Express, Discover, MasterCard, or Visa and can be used wherever the network credit cards are used. They are reloadable, which means the recipient can add more money to them when they run out.
  • Reloadable prepaid cards
    You can use these cards the same way you’d use reloadable gift cards, but the rules that cover these cards are not the same. If it isn’t sold as a gift card, then the federal rules that cover gift cards don’t apply. For example, for such cards, the card issuer might immediately start charging fees, like monthly service fees.

When you give the card, give the terms and conditions and the receipt, too. The terms and conditions are sometimes included in the original packaging. Also, consider the financial condition of the business offering the card. For example, if you give a store gift card and the retailer goes under, the card may not be redeemable. Also, if locations near your recipient close, the card may be harder to use.

If you get a card as a gift

Here’s how to make sure you’re getting the most out of it.

  • Gift cards should spell out what fees they charge, so read the fine print. For example, even though the federal rules are the same for all gift cards, additional policies may be set by the merchant or bank issuing the card. Be sure you understand these policies.
  • What happens if you lose your card or if it’s stolen? Some issuers, like stores, might not replace them . Other issuers might replace the card, but only if you registered it before it was lost or stolen.Use the card sooner, rather than later. Take my word for it, these cards can be easily misplaced and forgotten.
  • Write down the card number, security code, and customer service phone number and keep them in a safe place.
  • Treat the card like cash, especially if the issuer will not replace it, and keep your card until you are sure you will not be making any returns. Some merchants require that refunds be added back to the card.

To learn more about pre-paid cards, Ask CFPB.

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