What You Need to Know About Gift Cards and the Law
Gift cards are the quintessential easy gift idea. Everybody uses them, and they avoid questions like “Will this fit her?” or “Will he like this?” Gift cards and gift certificates are available from all sorts of stores, ranging from the mundane like grocery stores and drug stores to more specialized businesses like spas and travel agencies. No matter where you purchase or receive a card from, however, it is important to protect yourself as a consumer and be familiar with your rights surrounding gift card use. After all, these are used as form of currency and ought to be treated as frugally as one would treat cash.
What can I do with a gift card I don’t want?
There are a lot of options for putting gift cards you don’t want to good use. There are websites that exist for the sole purpose of buying and selling gift cards. Gift Card Granny, for example, will buy your card for 60%-80% of its value. You can also sell your card on a website like Craigslist or eBay. Other websites like Gift Card Swapping allow you to trade your gift card for one you’ll actually use.
If you’re feeling charitable, many nonprofits, including local schools and churches, will accept gift cards as donations. Gift cards are also great for re-gifting. There’s no reason to let any gift card sit around and be forgotten!
Can my gift card expire? Can I lose the balance on my gift card?
The short answer: It depends on what state you live in.
The long answer: It depends on what state you live in, and the extent to which your state is complying with federal law.
In 2009, the Credit Card Accountability Responsibility and Disclosure (CARD) Act [gpo.gov/fdsys/pkg/PLAW-111publ24/pdf/PLAW-111publ24.pdf] passed into federal law. The act covers a lot of ground surrounding the protection of credit cardholders, but it also created some federal standards for gift card issuers that are intended to protect consumers. These include requiring that cards, with a few exceptions, expire no less than five years after issuance and that dormancy fees can only be charged after one year of inactivity and only if these fees are fully disclosed to consumers. According to the CARD Act, stores are allowed to begin charging dormancy fees – meaning, a charge to keep the card active when it has not been used after a certain amount of time – after one year of inactivity, and no more than one charge per month. Eventually, these charges may deplete the value of the card. This is an important way stores and major card issuers like American Express make money. However, some states have introduced additional, and sometimes contradictory, legislation surrounding gift card law.
For example, New York law allows stores to begin charging monthly dormancy fees after just one year of inactivity. It is also legal for stores to charge a replacement fee for lost cards, and they do not require stores to give cash back for small balances on cards. Additionally, after five years cards are deemed “abandoned” and the balance of the card is forfeited to the state. Other states, like New Jersey, establish abandonment after as little as two years of inactivity. (In New Jersey’s case, this policy has been deemed unconstitutional, so the state remains in flux between enforcing the overturned state standard and the federal standard.) Such provisions, which remove the profit for card sellers that comes with unused cards, have caused major issuers like American Express to pull out of grocery and convenience stores in some states.
For comparison, California grants gift card users with protection beyond the federal standard. Cards are never allowed to expire, even after five years, and dormancy fees can only be charged after two years of inactivity and only if the balance on the card is less than $5.
A good resource for finding the specific laws in your state can be found here. Because not all card issuers or states are in compliance with the federal law, consumers should be conscientious about reading the terms of the card. Generally, it’s smart to try to spend cards as soon as possible to avoid forgetting about them, and to use the full balance of the card.
What if there’s only a little money left on my card?
You may be able to get your balance in cash. Under the CARD Act, most businesses are required to provide cash for the remaining balance on a card if the balance is less than $5. (In some states, this minimum value is higher.) Of course, businesses often fail to train their front-of-the-line staff on this law, so you may need to escalate through the ranks to find someone actually informed of the law.
What should I know about online gift cards?
Online “gift certificate” sites that offer deals like Groupon and LivingSocial fall into a somewhat gray area of the law. Generally, they are treated as coupons rather than gift cards, meaning they are able to generally set their own terms when it comes to expiration dates and redemption policies. Groupon, for example, requires that stores honor the value a customer paid for a deal after the deal has expired, but only as a store credit.
Virtual cards, such as the popular Amazon or iTunes cards that are often sent via email, do not usually expire. Sometimes they can be redeemed only online and not at brick-and-mortar stores, so read the terms of the card carefully. Otherwise, they are subject to the same laws as tangible cards; for example, Amazon includes the required language to indicate that cash refunds are only available where “required by applicable state law,” although it does not give information on how to go about claiming small balances in cash.