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Consumers to enjoy new gift card rules this holiday season

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Release Date: December 1, 2010

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WASHINGTON, DC— For the fourth year in a row, according to the National Retail Federation (NRF), gift cards are America’s most requested gift this holiday season. New this year, however, are extra safeguards in place for consumers, mandated by the Credit Card Accountability, Responsibility and Disclosure Act of 2009 that went into effect earlier this year. Starting in August, the CARD Act has made for numerous changes in the credit card industry, and – good news for gift card givers and receivers this holiday season – it also has some implications for the gift card industry. According to the NRF, Americans will spend an average of $145.61 on gift cards, up from $139.91 last year. Total gift card spending is expected to reach $24.78 billion.

“There’s good news for consumers planning to purchase gift cards for friends and loved ones this holiday season, as well as for those of us who receive them,” said Sally Greenberg, NCL Executive Director. “With sales of gift cards expected to reach nearly $25 billion this year, it’s about time consumers benefited from improvements to the industry’s practices. With better fine print, better expiration dates, and more standardized rules, consumers can buy and use gift cards with greater confidence this holiday season.”

Here are the key elements of the new Credit CARD Act that affect gift cards:

Standardized Expiration Dates. Gift cards cannot expire less than five years after purchase.

Better fine print. Gift card issuers must clearly disclose dormancy and inactivity fees.

No more unused balance fees – for the first year

Starting now, no cards purchased in the previous 12 months can carry fees for going unused. In the past, unused cards lost value more quickly due to these inactivity fees. The good news is that now, issuers must not start tacking on the fees for a full year. The bad news is that there is no limit on the amount of this fee, which can only be assessed once a month.

Fees subject to these restrictions include monthly maintenance or service fees, balance inquiry fees and transaction-based fees, such as reload fees and point-of-sale fees.

Even with better safeguards for consumers in place, NCL is still warning consumers to give and use gift cards wisely. The cards, while offering better features, still come with greater restrictions than cash.

Tips for buying and giving gift cards

  • Encourage the recipients of gift cards to use them quickly to avoid losing the value of the cards to fees.
  • Ask for a gift receipt for each card purchased and include the receipt when giving a gift card. This will allow the cardholder to replace the card if it is lost or stolen.
  • Read all terms and conditions prior to purchasing a card. If the terms are not disclosed or if they are too difficult to understand, consider purchasing a different card.
  • Be wary of gift cards sold on online auction sites. These cards are often stolen or counterfeit.
  • Keep all gift cards and receipts in a safe, easily accessible place to avoid loss and neglect of gift cards.
  • If a card requires registration prior to use, be sure to do so soon after receiving the card.
  • If a card’s value is too low to cover an entire purchase, a merchant may be able to do a “split-tender” transaction that will allow part of a purchase to be paid with the gift card and the balance to be paid by another means (cash, check, credit/debit card). If an employee seems unsure how to conduct a “split-tender” transaction, ask a manager to help.
  • Be aware of state laws pertaining to gift cards. These may affect expiration dates, fees, and card replacement.
  • Don’t throw away depleted cards. Some merchants require a card for returns.

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About the National Consumers League

Founded in 1899, the National Consumers League is America’s pioneer consumer organization. Its mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. NCL is a private, nonprofit membership organization. For more information, visit www.nclnet.org