Gift cards as Christmas gifts have been increasing in popularity, but so have their “hidden inactivity fees” – the reduction of a card’s stated value if it is not redeemed within a specified period of time.
The sweeping credit card reform laws set to take full effect Feb. 22 address these fees, but they only prohibit charging inactivity fees on gift cards if they have been used within the past 12 months. After twelve months of inactivity, card issuers will be allowed to charge a monthly inactivity fee.
The new gift card regulations will cover both retailer gift cards and prepaid general-use gift cards, such as those branded as Visa, American Express, MasterCard or Discover. In October, American Express announced it has eliminated monthly fees on its gift cards permanently, the only major card issuer to do so.
Consumers Union, the nonprofit that publishes Consumer Reports, and other consumer organizations, have sent a letter to Federal Reserve officials to expand gift card rules under the upcoming Credit CARD Act of 2009 to fully protect consumers from unreasonable fees.
They have urged the Fed to “protect consumers more fully by limiting the amount that that can be charged for inactivity to no more than the actual cost incurred by card issuers for maintaining the card.”
Many consumers lose the value of their gift cards because they don’t redeem them right away. A recent Consumer Reports poll found that one quarter of those given gift cards last holiday season still have at least one card they haven’t used, and 11 percent of recipients have four or more. An estimated that about $8 billion remained unredeemed on gift cards in 2006.
Consumers Union said the Fed should follow the lead of states, such as California, Oklahoma and Washington, where officials have limited inactivity fees when the balance on the card is $5 or less. These states limit card issuers to charging a $1 per month fee.
Under the Credit Card Act of 2009, gift cards cannot expire less than five years from the date the card was purchased or money was last added to the card, whichever is later. However, Consumers Union points out that many gift cards have a “valid thru” date, which is the estimated life-span of the card’s magnetic stripe and could be less than five years from the time the card was purchased.
The organization is asking the Fed to require card issuers to select expiration periods “long enough that the card will have at least five years of remaining life when it is purchased.”
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[...] Dec, 2009) http://ecreditdaily.com/2009/12/gift-cards-part-credit-reform/ Gift cards as Christmas gifts have been increasing in popularity, but so have their “hidden [...]