Web Wealth: The gift card, from all angles
Gift cards have swiftly become the default present for holiday giving. With the season upon us, let's look at the financial risks and rewards for gift-card givers, receivers, and sellers.
Gift cards have swiftly become the default present for holiday giving. With the season upon us, let's look at the financial risks and rewards for gift-card givers, receivers, and sellers.
Nothing beats the warm feeling you get from giving a gift - except for the hot prospect of getting something for yourself in return. At PocketYourDollars.com, a post by Carrie Rocha lists scores of gift-card deals that include discounted cards and free gift cards in return for purchased cards. Outlets offering the deals include restaurants, websites, movie theaters, and grocery stores. Commenters on the page have added other deals. And the page is set up so you can check the deals you're interested in and print them out.
Be wary of gift-card tricks. The Federal Trade Commission gives some guidance on the different types of cards and regulations that apply to them. Here's just one important thing to know: "Money on a gift card cannot expire for at least five years from the date the card was purchased, or from the last date any additional money was loaded onto the card. If the expiration date listed on the card is earlier than these dates, the money can be transferred to a replacement card at no cost." And, an expiration date must be clearly disclosed on the card.
Some states add their own rules. New Jersey, for example, prohibits "dormancy fees." Here is a Consumer Union list of state rules on gift cards.
About half of holiday shoppers buy gift cards, Consumer Reports said last year. This CR article describes the limitations of the current rules, which "don't apply to loyalty and reward cards and the promotional gift cards you redeem with credit-card points. Plus, if you get a gift card from a retailer that later declares bankruptcy, the chances of redeeming the card fall somewhere between slim and none." The article was supportive of a congressional bill, the Gift Card Consumer Protection Act, then pending, that would have banned gift cards with expiration dates and "nonuse" fees. The measure later was referred to a Senate committee, and died.
Gift cards can be a boon to businesses. This "Gift Card Marketing Guide," published by First Data Corp. (a payment-processing company), tells how and why to use gift cards to promote a business. It notes some things that consumers would do well to keep in mind. For example, it says that 31 percent of those who get gift cards "say they are more likely to buy a full-price item rather than an item on sale when using a gift card." It also notes that, for businesses, "you have possession of the dollars on the gift card from the time that the card is purchased. By depositing the funds into an interest bearing account, you will be able to earn a return on your outstanding gift card balances."