NCL Personal Finance Issues
The Credit Card Accountability, Responsibility and Disclosure Act of 2009 that went into effect earlier this year mandated a lot of changes in the credit card industry. It also has some implications for the gift card industry. There’s good news for consumers planning to purchase gift cards for friends and loved ones this holiday season.
Here are the key elements of the new Credit CARD Act that affect gift cards:
Better expiration dates. Gift cards cannot expire less than five years after purchase.
Better fine print. the 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 quiclkly 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.
More you should know about gift cards
The new Credit CARD Act rules do not apply to reloadable prepaid cards that are not marketed or labeled as a gift card or gift certificate. They also don’t apply to prepaid cards received through a loyalty award or promotional program. The majority of the cards we’re used to seeing however, such as those offered by major retailers or card networks like Visa, Mastercard, or American Express, will be covered. However, consumers should be wary of reloadable cards or cards received through the loyalty and promotional programs. A card that would fall into this category is a free “loyalty card” that gives the user $10 off a $50 or more purchase from the same store. Such cards must still clearly disclose expiration dates and associated fees. These may be hard to distinguish from cards that are covered by the rules. Consumers should be sure to check the disclosure language on cards to ensure that they are purchasing cards that are covered.
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 card holder 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.