Remember when people gave and received actual gifts? Today, presents often come in the form of plastic rather than wrapped up in ribbons and bows. More than 80% of Americans have received a gift card from someone and 76% have bestowed one, according to a new Bankrate survey.
Lavishing loved ones with gift cards is easy and convenient, and receiving them is nearly as good as getting cold, hard cash. But not all gift cards are created equal. Though consumer protections enacted in recent years have cut down on fees and increased the amount of time you have to use a card, these popular presents still have some quirks gift givers (and receivers) need to watch out for.
While only 4% gift cards from retailers come with fees, nearly all general-purpose cards (those you can use at any store) charge fees, according to Bankrate’s survey of 60 widely used cards. You’ll pay between $3.95 and $6.95 when you buy one of these cards, on top of whatever value is loaded onto the card. Some also come with inactivity fees and charges for replacing a lost card. A lost U.S. Bank Visa gift card will cost $15 to replace, for example, an amount that’s deducted from the card balance.
Card issuers are required to provide information about fees and expiration on the label, and it’s wise to give that fine print a quick scan before you buy. “If you can’t find the information you’re looking for there, the packaging will also have a contact number you can call or a website you can go to get more information,” Claes Bell, CFA, a banking analyst with Bankrate.com, said. Bankrate also offers an online tool for comparing gift cards.
Also worth looking into are a card’s security features, especially considering how frequently gift cards go missing. Forty percent of millennials say they’ve lost a card before using the entire balance, Bankrate reported. About $1 billion in gift cards went unused in 2014, according to CardHub.com.
Disorganized or unlucky consumers may still be able to use their cards, though. Three-quarters of cards now offer some kind of loss protection, though this perk is much more common on e-cards than physical cards. In addition, half of cards now come with the option to set a security code, which can keep a card’s balance safe it it’s lost or stolen.
If you misplace a card without those safeguards, getting your money back may be tricky. “Some cards may allow consumers to get a new card issued if they can produce a proof of purchase and the gift card number,” Bell said. If that’s not an option, you may be out of luck. (In other words, do your friend a favor and include the receipt in the envelope.)
When shopping for gift cards, make sure you only go through trustworthy sellers. Buying gift cards in a store is usually safe, but the Better Business Bureau does suggest checking to make sure the card hasn’t been tampered with (a visible PIN is a bad sign). Thieves might scan numbers of the cards on the rack and then drain the funds once they’ve been activated, according to the AARP.
Bargain hunters looking for discounted gift cards on sites like eBay buy at their own risk, the FTC warns. Using a gift card broker like Raise or Card Cash instead may be safer, since those sites promise to guarantee the value of the cards you buy for a certain amount of time after purchase. (You can also use these sites to get rid of your own unwanted gift cards). When buying cards, be wary of stores that are in financial trouble. If the chain goes bust, the gift card could be worthless, as the people holding $210 million in gift cards from Borders found out to their dismay.
One thing that gift card buyers and sellers don’t have to worry about is losing the value of a gift card due to expiration. That’s largely a thing of the past, thanks to Federal Trade Commission rules that protect the balance for five years after purchase. Only 8% of cards Bankrate looked at expired, and in some cases the use-by date only applied to the card itself, not the money on the card.
Nonetheless, the best move when you find a gift card in your stocking is to go shopping, promptly.
“The safest course of action is to treat gift cards like cash and spend them as soon as possible,” Bell said.