Watch Out For Fees With Gift Cards

Like candy canes and drunken family dinners, gift cards have become a Christmas staple. Bankrate has reviewed a wide number of them and published the results to help you pick the best one for your needs. To avoid fees, you should stick with “closed-loop” cards—that is, a card issued by a specific retailer for use only with that retailer. Almost all retailers now offer cards that don’t expire and don’t charge maintenance fees, with the notable exceptions of Macy’s and Bloomingdales, whose cards both expire two years after purchase. However, several retailers—CVS, for example—still charge “dormancy” fees on cards that have been inactive for anywhere from 6 to 24 months, so be sure to check the fine print to see how this is addressed.

“Open loop” cards that you can use everywhere—usually issued by credit card companies or national mall chains—tend to be the ones that will cost money, both in activation and maintenance fees. However, if you find a discount program (like American Express’s “Especially for…” cards), you can bundle some potential savings on particular items that the recipient is likely to purchase. (That’s a lot of ifs, but the opportunity for savings is there.) The fees can change year by year, so don’t go by past experience if you’re a returning customer—for example, Discover Card used to ship its gift cards free, but in 2006 added a shipping and handling charge of between $3-7.

Online cards are frequently restricted to online purchases, in case you’re thinking of buying one for someone who doesn’t shop online.

The following states have laws that forbid expiration dates on gift cards, but since banks fall under federal jurisdiction, they may be able to override any state laws and still restrict the gift cards they issue. Again, be sure you check the fine print if you’re worried that the recipient might take a long time to redeem the card.

For example, in California, Florida, Maryland, Massachusetts and Nevada, cards cannot expire. Other states put limits on expiration; for example, cards can’t expire within the first two years of issuance. To find out how your state treats gift cards, check with your state’s consumer protection department.

Bankrate says that in general, cards with no fees, expiration dates, or maintenance costs tend to disclose these facts very clearly, since it’s the sort of information consumers like to see. That means if you can’t clearly find this information in the literature, the odds are good there’s a fee and the business is intentionally trying to obfuscate it to avoid driving off wary shoppers.

Here’s a detailed chart of many retailer cards available, along with details on fees and expiration dates. There’s also tabs on the chart to switch to views of credit cards and malls. Or check out this chart for information on what various retailers are offering in the way of e-cards this year.

“2007 Gift Card Study: Tops for holidays” [Bankrate]
(Photo: Getty)