Washington I have a love/hate relationship with gift cards.
I love the concept and how they make gift-buying so much easier. A gift card is a respectable way to give money — without looking as if you have no idea what to get a person, which, if we’re being honest, is often the case. Yet personally, I hate to receive a gift card. I’m a hoarder, and I don’t like to waste a gift card on hair rollers or the everyday personal items I need. So I tuck the cards away. Or I’ll hide a card from a particular restaurant, waiting for a special occasion to use it.
The problem is, I forget I have the card or — and this is one of the few times I’m tempted to curse — I find out the card has expired or that fees I didn’t know existed have eaten up the value.
But now gift cards are getting a protective shield. The Federal Reserve has proposed guidelines that are supposed to make the cards less frustrating for people like me who have trouble cashing them in months or even years after receiving them.
Tucked in the Credit Card Accountability Responsibility and Disclosure Act of 2009 is a section addressing the fees for gift and stored-value cards. By Feb. 22, the Fed has to release final rules on the implementation of the gift-card provisions. Unfortunately the rules won’t help you for this holiday season. The provisions don’t take effect until next August.
The majority of consumers who are projected to spend $50 billion on gift cards this year will purchase cards without expiration dates and pay no fees, according to the Consumer Federation of America. Most national retailers do not charge fees or place expiration dates on their cards.
Can you guess who does?
Gift cards issued by banks, malls and credit card companies are more likely to add expiration dates and activation, maintenance, inactivity and transaction fees, according to the National Retail Federation. Some bank-issued gift cards even charge a fee for checking the balance, the retail group reports.
The consumers who will spend nearly $4 billion buying general purchase gift cards — those not connected to a specific retailer — pay $4 to $7 for the cards. Some of the card issuers have the audacity to add monthly fees as high as $4.95 if the card is not used six months after purchase. In September, American Express announced it was eliminating monthly fees on all its gift cards, including those already purchased and stashed away in consumers’ wallets and purses.
Targeting specific cards
These general purchase cards with the infuriating fees are the biggest target of the new rules. The Fed is proposing to prohibit dormancy, inactivity, and service fees on gift cards except under certain conditions. For one, there has to have been at least one year of inactivity on a card for a fee to be charged. If a person waits more than a year to use the card, no more than one type of fee can be charged per month.
Under the proposed rules, a gift-card buyer has to be given clear and conspicuous disclosures about the fees. Additionally, issuers would be prohibited from offering cards that expire in less than five years. In this new age of consumer protection, the Fed wants to know what you think of its proposed rules on gift cards. You can e-mail firstname.lastname@example.org. Be sure to include Docket Number R-1377 in the subject line. You can also mail Jennifer J. Johnson, secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington, D.C. 20551.
The Fed should be bolder and prohibit any dormancy, inactivity or service fees, not just within the first year. What’s the point of those fees anyway? Oh, I know. The issuer is irritated that many people don’t rush to the store, spending more than the card is worth, so the fees are a deterrent to holding on to them. In a survey, Consumer Reports noted that of those who were given gift cards last season, 65 percent said they typically spent more than the value of the card.
Consumer Reports also found one-quarter of those who received gift cards last holiday season still have at least one they haven’t used, and 11 percent of recipients have four or more. As for an expiration date, since consumers pay good money for a gift card, it should never expire. Never.