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Buying a Gift Card for Someone? Here’s What You Need to Know

Buying a Gift Card for Someone?  Here’s What You Need to Know:

Christmas is in two weeks so you are probably starting to think about Christmas shopping.  Just kidding, you got it all done before Thanksgiving.  In any case, if you are like the millions of other Americans this year, you likely purchased or are about to purchase a gift card of some type.  In 2012 it is expected that over 100 Billion will be spent on gift cards annually.

Retailers love gift cards, because it is cash today for goods or services they get to deliver tomorrow.  Actually, retailers love it even more because billions of dollars go unspent on gift cards every year.  In fact companies have sprouted up all over the place just to buy your old gift cards, because by law, gift cards cannot expire.  That means you might be able to use the 86 cents on your Chilies’ gift card you got for your birthday 5 years ago.

Retailers and gift card issuers have many ways around this law and many other tricks that you should be aware of as you endeavor to find just the right gift card from Amazon for that special someone.

Unlike credit cards, gift cards do not have all of the standard required disclosures.  The Credit CARD act of 2009 does require gift cards to add more disclosures, such as service charges and dormancy charges, but The Act does not require these disclosures to be in a normalized format.  Therefore if you want to know anything about your gift cards you need to read the fine print and ask the hard questions.

Following are some issues you need to consider about your gift card:

1.    Your Gift Card Can Expire

Most gift cards have an expiration date.  But the funds on the card will not expire.  The Credit Card Act of 2009 requires that retailers issuing gift cards honor them indefinitely.  But it is no coincidence that Billions of dollars a year go unused.  Usually, a retailer will have a 1-800 number for customers to call in order to be reissued a gift card after expiration.  A replacement card will generally be sent at no additional charge.  (Have you ever heard of anyone doing this?).

2.    There are Additional Fees

You bought a $50 gift card but your nephew was unable to purchase the latest video game for $49.95.  Obviously the gift card does not pay the sales tax—that would be too cool. But on top of that, many gift cards charge service fees.  Sometimes these fees are characterized as convenience fees or dormancy fees.  Dormancy fees generally kick in if the card has not been used for 2 years.  Some retailers will deduct $2 dollars a month after the card has not been used for 2 years until the balance hits $0.

3.    You Can Add Funds to the Card

This is kind of a no brainer.  Retailers love gift cards for the above mentioned reasons.  Naturally they are going to allow you to add funds.  There are statistics well known to retailers indicating that for every dollar placed on a gift card a certain percent will go unspent.  Therefore the more money put on gift cards the better.  Often retailers will only allow you to put more money on a card if you come into the store, but this tactic is fast becoming obsolete as more shoping is done exclusively online.

4.    You Might Be Able to Replace Your Card if Lost or Stolen

Retailers are not good at giving away money.  Most of them require you to register the gift card online or in some cases via mail or in the store.  It should come as no surprise that retailers want to ensure that they do not replace a card and thus allow someone to use it twice.  Therefore, retailers generally require that you register the card or provide some proof of purchase.  In most cases a receipt will do.  Save those receipts.

5.    You Can Know Your Balance

My method is to write it directly on the card or on a small post it note I tape to the card.  But there are other methods.  Today you can usually find it online.  Most gift cards today are in the form of a credit card, so the id number is unique to that card.  Also, it will always be available in the store from a cashier.  Lastly, it should be readily available on a 1-800 which should be on the card as well.

6.    There are Additional Perks to Using a Gift Card

As mentioned above, retailers love gift cards because of the amounts that go unused.  Retailers, therefore, often game this by offering additional perks to customers for purchasing gift cards.  These perks include free shipping, additional discounts, or limited editions.  This is all because retailers know that portions of the money will never be spent.  Use this to your advantage.  Be a savvy consumer, and always check creditsense.com for the good offers.

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